Thousands of tenants could find it much easier to get a mortgage, as Equifax becomes the latest credit reference agency to include rental payments on its credit reports.
Equifax, one of the UK’s three main credit reference agencies, has revealed it’s been collecting rent payment information from CreditLadder, the UK’s largest rent reporting platform, since August 2019, and the information went live on Equifax credit reports on 5 March.
Here, Which? explains how the Equifax and CreditLadder collaboration will help tenants, which mortgage lenders use which credit reference agency to make decisions, and how rent reporting platforms work.
How will this help tenants?
The move will help tenants, many of whom might not have much of a track record of official borrowing, build up their credit profile to prove their creditworthiness.
Tenants sometimes pay out much more in monthly rental payments than homeowners but find it difficult to prove they could borrow and afford to repay loans such as a mortgage.
Experian, the UK’s largest credit reference agency, has been including CreditLadder’s rental data on Experian credit reports since October 2018.
However, not all lenders use every credit reference agency and some only refer to one to make decisions on whether they will lend to you.
Equifax’s move will make a difference to tenants, as it increases their chances of their rental payment record being seen by more lenders.
That said, when Which? asked TransUnion (the UK’s other major credit reference agency) it didn’t confirm that it would start including rental payments on its reports – which means that renters could still be unfairly penalised.
- Find out more: credit reports explained
Which lenders use which credit reference agency?
Which? research from October 2018 surveyed 25 mortgage lenders and found that six used Experian credit reports exclusively, three only used Equifax data, while eight used all three credit reference agencies to make decisions about lending.
|Credit reference agency the mortgage lender checks||Number of mortgage lenders|
|Both Equifax and Experian||2|
|Both Experian and TransUnion||1|
|Both Equifax and TransUnion||1|
Source: Analysis of Which? research from October 2018
Now that two out of the big three UK credit reference agencies include rent on credit reports, you have more chance of your rental payments being taken into account in lending decisions. However, there are still some lenders you might slip through the net with if they choose to only use TransUnion’s data.
- Find out more: improving your mortgage chances
What is a rent reporting platform?
A rent reporting platform is an online system that verifies rent has been paid and passes that information onto a credit reference agency.
This enables tenants to build up their credit history, which you need to get approved for to access the best deals on borrowing.
CreditLadder was the first such platform and, since being set up four years ago, it has reported more than £150m of rental payments from tens of thousands of tenants.
It claims to be the largest platform of its type in the UK and will be the only platform allowing private landlords, tenants and letting agents to feed payment records through to both Experian and Equifax.
Canopy, another rent reporting platform, only sends information to Experian.
How can you use CreditLadder to report your rent?
CreditLadder uses Open Banking, a system that lets you unlock your banking data, to allow tenants, landlords and agents to share rental information.
By agreeing to reveal the data through Open Banking, CreditLadder is able to read a bank account to see when rent was paid. It then submits this data to Experian and now Equifax.
If you are a private or social housing tenant, you should find out whether your landlord or letting agent is signed up to a platform, and ask for your payment information to be added.
Alternatively, you can self-report. CreditLadder’s service is free to tenants – you just need to opt in to have the platform see when rent payments are made.
- Find out more: 15 Open Banking apps set to transform your money
Are there any downsides to rent reporting?
This move should help tenants by building up their credit history with a track record of repayments.
If they make their rental payments on time, it’s likely to boost their credit score.
Missed or late payments, however, could bring the credit score down, restricting availability of better borrowing deals.
Developing your credit history and improving your score is useful but it’s no guarantee that every bank will extend credit, as they still weigh up affordability and measure you against their own criteria.
- Find out more: Credit scoring can seem like a dark art. In our investigation into the sector, we found that many people were confused about the action that could boost or lower their score. Read more in: Credit scoring: are you in the dark?