Better credit scores to benefit renters who pay on time, thanks to a new initiative.

Credit scoring

Experian, the credit reference agency, says it is now taking account of 1.2 million tenants’ payment habits.

Most of these people, around 79%, can expect to improve their access to bank accounts, loans, and mortgages by enhancing their credit scores. The analysis also indicates that adding rental data to credit reports will increase the proportion of tenants able to prove their identity online from 39% to 84%, which will additionally broaden the range of financial services available to fastidious payers.

Credit scores make all the difference when taking out any financial arrangements like loans. They determine the terms people are offered or whether they will be approved at all.

Bad or limited credit histories have the power to reduce a person’s chances of obtaining often vital finance, like mortgages, car finance, and credit cards. At finder UK we help people find out about all the ways they can build up their credit history and enhance their credit scores.

Prior to the latest Experian move, the majority of people renting their homes had been unable to prove the likelihood of them meeting monthly mortgage payments. But last year, just under 150,000 people signed a petition to demand increased recognition of tenants who regularly pay their rent on time.

The petition’s organiser, Jamie Pogson, claimed to have paid more than £70,000 in rent when it was due but had still found it a struggle to successfully apply for a mortgage.

As a result of the petition, a debate was held in Parliament and afterward, Treasury minister Stephen Barclay argued that lenders should act more favourably to those renters who kept their payments up to date.

Now, tenants’ rental payments appear on both Experian’s CreditExpert and in statutory credit reports as part of a Rental Exchange initiative that has been developed in partnership with the Big Issue Group’s social investment arm.

Data is being reported into the Rental Exchange by over 150 social housing providers, along with local authorities and letting agents. Experian is also working with property technology companies (PropTechs) to help tenants better report their data themselves.

The downside of this initiative is that those with poor records of paying rent on time could discover their credit scores are adversely affected, which would make it harder and possibly more expensive, to gain access to other financial services.

Social housing or council tenants need to ask their landlord to report their rental payment data to the Rental Exchange. Private tenants who pay large landlords or letting agents should request the same, but private tenants can also self-report their payment data via an Experian partner like CreditLadder or Canopy.

Experian Consumer Services Managing Director Clive Lawson recognises that tenants each month pay a large amount of money for their homes and says it’s right these regular payments are recognised “in a similar way as mortgages”.

Big Issue Group MD John Montague says the aim has been to create a fairer playing field for people to access credit because it was recognised that “people in poverty were routinely penalised”.
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Home buyers warned to beware inflated mortgage fees when offered deals

Lenders are upping mortgage fees to levels that are the highest they have been in more than five years, according to new data.

With the latest figures indicating that the average mortgage fee has risen by £15 in the last three months and now stands at £1,005, home buyers are warned to be wary of how fees can bite.

At Finder UK we’ve teamed up with the UK’s leading fee-free mortgage broker, L&C, to provide advice on the mortgage deal that is right for you. Our expertise can help whether you’re buying a home, remortgaging or purchasing an investment property.

It’s wise to be careful because, according to financial information company Moneyfacts, which collated the latest data, while mortgage lenders appear to be concentrating on competing with each other for the lowest rates on the market to attract borrowers, many of them are offsetting their reductions by raising fees instead.

Moneyfacts commentator Charlotte Nelson points out that not only are average mortgage fees rising, but they are now surpassing the £1,000 threshold for the first time since the August of 2013 when the average was £1,001. Nelson describes this as “disappointing” and advises that borrowers need to think twice before making an application for any mortgage, and they should always check the terms and conditions.

The Bank of England has increased the base rate from 0.25% to the current rate of 0.75% since November 2017 but many mortgage rates are being offered much lower than providers’ costs. For example, the average two-year fixed rate currently stands just 0.16% higher than in November 2017 when it was 2.33%.

The table below illustrates the impact fees can have on your payment: it demonstrates that even though the fixed rate is set much lower, the fee-free mortgage product still works out as less expensive in the first year.

Lender Rate LTV Fees True cost after 1st year*
Yorkshire Building Society
1.34% fixed to 31/12/2020
60%
£995
£10,414.10
Yorkshire Building Society
1.71% fixed to 31/12/2020
60%
£0
£9,837.08

Source: Moneyfacts.co.uk. *True cost based on borrowing £200,000 over 25 years on the basis of repayment-only.

Nelson emphasises that homebuyers should take note that the impact of fees can vary depending on how much is borrowed. For example, she says, a low rate/high fee offer may be perfect for people looking to buy property at the more expensive end of the market. But she warns that for average borrowers who remortgage every two years, fees soon add up and it may be better spending any additional cash overpaying the mortgage.

Taking out any mortgage is a big commitment and should not be rushed into without exploring the available options. That’s why finder UK has designed a page to help you better understand how mortgages work and how to compare the different deals that are out there.

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