Private tenants with a record of paying their rent punctually are set to be rewarded with better credit scores, as Experian announces it is taking into account the payment habits of renters. The credit reference organisation estimates that approximately 80 per cent of tenants across the UK will see an increase in their credit scores, which will in turn make it easier for them to secure loans and mortgages at enhanced rates. A debate by MPs took place last year to decide whether credit scores should take into account rent payments made by private renters when applying for mortgages to buy their own home.
Taking place at Westminster Hall, the debate was initiated by a petition raised on the issue by Jamie Pogson, a construction worker in Plymouth. The petition attracted over 147,300 signatures, a total which significantly exceeds the limit of 100,000 required for a debate in parliament.
An independent survey of around 3,000 buy to let landlords has also been conducted by the RLA (Residential Landlords Association), which discovered that approximately 61 per cent of landlords would back the addition of rental payments to a tenant’s credit history, in a similar way that mortgage payments are added to the credit history of homeowners. The RLA has stated that it believes the inclusion of rent payments into credit histories would allow landlords to make an informed and accurate assessment of any prospective tenant’s rent payment and credit history.
CreditLadder, an organisation which partners Experian, provides individual tenants with the opportunity to detail rent payments, which are then verified each month. CEO, Sheraz Dar, believes that the system of rent payment recognition will likely become standard across the sector in the short term. During Prime Minister’s Questions earlier this month, Justine Greening, former cabinet minister, noted in a speech that MPs across all parties wish to see rent payments identified by lenders in the same way as mortgage payments, creating a level playing field. The announcement from Experian represents another step forward in making this a reality.
The Creditworthiness Assessment Bill endorsed by Lord Bird, is scheduled to be read at the House of Commons this month, as it passes through with no amendments in the House of Lords. The goal of the Bill is to ensure credit providers take into account both council tax and rental payment history.
The Equifax UK head of credit and risk in Europe, Laura Hales, has explained that there must be changes to the way current credit reports are compiled, with rental payment history included. Recent research has shown that by including rental and council tax payment history, this could improve 33 per cent of the credit scores of all tenants. For those private tenants with the thinnest credit files, the research also showed that around 69 per cent of these tenants would see an improvement to their credit score. Ms Hales also confirmed that Equifax is working closely with policy makers, lenders and providers of rental apps, to increase coverage. It is vital that the industry helps recognise responsible tenants, and grants them access to affordable credit. As consumer awareness grows, and more data becomes available, a fundamental shift would allow more people to access credit as needed.
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