Tenants Rental Payment and Credit Scores

Tenants Rental Payment and Credit Scores

One of the big complaints of tenants is that their credit score is not improved by all the rental payments they make says David Lawrenson of www.Tenants-Renting-Guide.com. However, this is about to change.

Both private renters and social housing tenants can now opt in to the new, free “Rental Exchange Initiative” which will record rental payments on your Experian credit file.

Apparently, the scheme has actually been running in the background (for those who’ve already signed up) for more than two years with an estimated 1.2 million renters’ payments already recorded. From now though, those payments will become visible in people’s files. New joiners will be added as they join up.

As lenders get access to this information too, this could make it easier for those who pay their rent on time to get a mortgage and indeed, be accepted for other credit.

Naturally, for those who miss payments, there will be a negative impact on your credit file.

Experian thinks that around 80% of tenants already signed up will see a noticeable improvement in their credit score. However, it’s too early to know exactly how lenders will use the extra information.

Tenants Rental Payment and Credit Scores – The Rental Exchange

The Rental Exchange scheme was launched by credit reference agency, Experian together with The Big Issue Group in March 2016 as a way of allowing tenants to build up a credit history and improve credit ratings by paying their rent on time each month.

Rental payment history is used in the same way as mortgage payment data, so for those signed up, your payments will be recorded and added to your credit file.

Before Rental Exchange started, renters were unable to show they could meet regular payments. This was especially so for those who didn’t already have any other credit product.

Already, more than 150 social housing providers, local authorities and letting agents are reporting data into the Rental Exchange scheme – though you can opt to do it yourself now if yours hasn’t signed up yet. And if you rent from a private landlord, you’ll most likely need to ask to join the scheme.

The sooner you join the scheme, the better – as the longer rental payments are recorded for, the better.

Experian is the only credit agency to record rental payments so far. Equifax and Callcredit don’t currently take them into account.

Tenants Rental Payment and Credit Scores – Joining Up

You can easily join the scheme if your social housing provider, letting agent or private landlord is already signed up.

You will need to ask your landlord or letting agent if they are part of the scheme. (Experian won’t tell us which landlords and agents are part of it). If they are, request for your payment information to be added.

If they are not, you can self-report, but the way your payments are reported is slightly different.

You’ll need to sign up to one of Experian’s partners Credit Ladder or Canopy and connect them to the bank account from which you pay rent (granting read-only access) and it uses Open Banking to verify and monitor rent payments.

Forgotten if you joined before? The easiest way to check if you’ve already joined is to speak to your landlord or view your Experian credit report.

Tenants Rental Payment and Credit Scores – Why does it matter?

Making your payments on time (which 98% of private tenants do, according to Experian) could see your credit history improve, therefore making it easier to prove your identity and apply for credit products.

Think of it as being a bit like a financial CV – which allows potential lenders to see your spending history, helping them make better informed decisions about whether they want to take you on as a borrower.

Building a good credit history through your rental payments will make you more attractive to a lender. Showing you can meet payments on time will improve your credit score, though lenders won’t see this score. Bear in mind, though that each lender has their own scoring system – some will accept you for a mortgage, others will not.

But having good rental data will really help them and you.

My book has useful information on what else you can do to improve your credit rating.

Of course, if you’ve struggled to pay your rent in the past, have been late with payments or missed them completely, Rental Exchange won’t be right for you and could negatively impact your credit file.

My Book for Tenants

Tenants looking for property and also searching for good landlords and letting agents would be well advised to buy my book, “Tenants Guide to Successful Renting”.

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David Lawrenson, who is also founder of LettingFocus, also writes for property portals, speaks at property events and is regularly quoted by the media. See: David Lawrenson in the Media.

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