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”.