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Experian credit reports to include rent payments for the first time

Innovation could make it easier for tenants to get on the property ladder

Rent payments will now appear on the Experian credit reports of more than 1.2 million tenants across the UK – potentially making it easier for this group to get on the property ladder and access finance deals. But is this really the revolution that renters have been waiting for?

Tenants that pay their rent on time and have opted into The Rental Exchange scheme can now use this information to bolster their credit profile and unlock better deals on credit cards, loans and mortgages.

Millions of people pay out thousands of pounds in rental payments each year- yet still find it a struggle to prove they could pay a mortgage or afford other credit commitments like a personal loan. It’s a catch-22 for renters and prompted a petition which attracted nearly 150,000 signatures  last year.

To tackle the problem, more than 150 social housing providers, local authorities and letting agents have begun reporting data into The Rental Exchange, developed in partnership between Experian and the Big Issue Invest (part of the Big Issue Group). Private renters also have the ability to opt-in via different routes.

Which? takes a look at how the scheme works, how it affects your credit score and whether it’s worth signing up to include rent on your credit report.


How rent on credit reports can save you money

Tenants that have opted into The Rental Exchange initiative will now be able to see their rental payments on Experian’s Credit Expert tool and their free statutory credit report.

The report will show your name, home address and monthly rental payment amount, similar to how mortgage payments are reported. This information will be updated once a month to show if you have paid your rent on time.

It’s anticipated that the new data will help tenants build up a good credit history with a record of regular payments and make it easier for participants to pass credit checks.

You can see an example of how rent payments will be recorded below:

Source: Experian 

Experian says by adding rental data to credit reports, the proportion of tenants who can prove their identity online will jump from 39% to 84%, broadening the range of financial services available to them.

In March, Experian found there are around 4 million UK adults with a ‘thin-file’ with little or no information that lenders can use to verify credit applicants. These applicants may fail to qualify for the best loans, credit cards or mortgages, leaving them with no way to borrow or paying a higher price.

John Montague, Managing Director, The Big Issue Group, commented: ‘We set out with the aim of creating a fairer playing field for people accessing credit because we recognised that people in poverty were routinely penalised.

‘The Rental Exchange has succeeded in making more inclusive data available to credit service providers, and it is this data which has the potential to reduce levels of financial and digital exclusion and improve the circumstances of some of the poorest in our society.’

  • Credit scoring can seem like a dark art. In our investigation into the sector, we found many were confused about the action that could boost or lower their score. Read more in: Credit scoring: are you in the dark?

Will lenders use rent payments to make credit decisions?

Experian says many lenders have expressed an interest in adding rental payment data to their credit decision-making process, while a number are already testing the data in their systems, though it was unable to reveal details of the firms involved.

We asked major lenders – including Halifax, Nationwide, Royal Bank of Scotland (RBS), Santander, Lloyds Bank, TSB and HSBC – how they would be using rental payments for making lending decisions.

The majority failed to comment. Those that did were cautious about saying the new reporting would be a boon to renters that may otherwise struggle to prove they can afford a mortgage.

Santander told Which?: ‘We assess individuals on affordability, lending criteria and their credit score. As a prudent lender access to information that supports the application is positive and will help provide a more in-depth picture of a potential borrower.’

RBS told Which? : ‘There are no immediate plans to incorporate rental payments into our credit scoring criteria for any lending we provide but it is periodically reviewed as new data becomes available.’

TSB told Which?: ‘We don’t currently include this [rental payments] within our credit reporting process, however, we are continuing to monitor and review the opportunity.’

  • Find out more about the first steps to buying a property in our how to buy a home guide

What is the impact of rent reporting on credit scores?

Lenders and other interested firms that access your credit report will be able to see rent payment data if you’ve opted into The Rental Exchange scheme, but for the time being the new information won’t impact credit scores.

That’s because it’s not clear how lenders will incorporate the information into their credit scoring process and lending decisions. Experian says it will update user’s credit scores once it gets enough feedback from lenders on how they are using it.

Until then Experian can’t confirm the size of any positive and negative impacts but says it is clear that a well-managed rent account should strengthen a tenant’s credit history. The firm estimates 79% of tenants would have seen a noticeable improvement in their credit score if lenders were to take rental data into account.

Which lenders use Experian?

Lenders can use one, two or all three credit reference agencies to perform a credit check and score you.

Use our table below to see which providers use Experian to make decisions about loans, credit cards and current accounts.

What are the other credit reference agencies doing?

Experian is the first credit reference agency to add rent payment data to its free statutory and paid-for credit reports, but the other credit reference agencies have plans to integrate new data sets too.

A TransUnion (formerly Callcredit) spokesperson told Which?: ‘We already take a broad range of consumer financial information into consideration and are investigating and looking at additional sources of data to help enrich a consumer’s credit report by including non-discretionary essential expenditure.

‘Rental is one payment type in a wider set of non-discretionary financial commitments to potentially adopt such as council tax, utilities, insurance and telecoms.

‘One important source of information that is becoming increasingly available is via Open Banking, which came into force in January 2018. This has started to enable consumers to explicitly share current account data, including payment and repayment commitments, when and with whom they choose.’

Rhona Parry, vice president of external affairs for Europe at Equifax told Which?: ‘The cost of living is a major issue for renters and they often pay more for credit than people with mortgages just because they cannot easily prove to lenders that they pay their rent.  Equifax is working hard with landlords and lenders to find safe, easy ways for renters to share their data and access better financial products at better prices.

‘Local governments are the biggest landlords in the UK, renting over 2 million homes to families who are much more likely to pay more for credit. With the Creditworthiness Bill and the Budget coming up in the next few days, the Government could give these efforts a huge boost and lower the cost of living for millions of our more vulnerable households by allowing all credit reference agencies to access rental data from local authorities.’

How to include rent on your credit report

You can get the rent you pay recorded on your credit file if you are a council or social housing tenant. You just need to ask your landlord to report your rental payment activity to The Rental Exchange.

If you’re living in a private rental managed by a major letting agent, you may also be able to ask them to report rental payments made through the scheme.

Alternatively, private tenants can self-report their payments through one of Experian’s partners such as Credit Ladder and Canopy.

Credit Ladder works by connecting to your bank account. It verifies your rent payment using read-only access to your account and reports this to Experian. Canopy, meanwhile, allows you to set up a rental profile and track your rental payments.

Should you add rent to your credit report?

If you’re renting but hope to one day get onto the property ladder, it’s may be worth signing up to a scheme that tracks your rental payments. While the data isn’t currently incorporated into your score, it could help inform the lender’s decision.

For more tips on becoming a first-time buyer, you can read our guide: are you ready to be a first-time home buyer?

That said, if you have a record of struggling to pay your rent on time, you might want to avoid the scheme, as it could impact a lender’s assessment of your mortgage or other credit applications.

 

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