Credit where credit’s due. Jamie Pogson, a father of two from Plymouth, Devon, sparked a debate in parliament after he collected almost 150,000 signatures on a petition asking mortgage lenders to take into account an applicant’s rental payment record. Mr Pogson had paid more than £70,000 in rent on time, but was still struggling to get a mortgage; surely this was proof enough that he could meet the repayments, he argued.
His frustration will be familiar to many members of Generation Rent who have discovered that, even if they are in a financially stable position, they can be stopped in their tracks by lenders’ strict affordability checks.
Yet change is afoot. Experian, the UK’s largest credit reference agency, is working with start-ups as part of its Rental Exchange initiative. Tenants can sign up to Credit Ladder to record rental payments that will later be added to their credit report (which lenders use to assess a person’s likelihood of repaying a debt). Last week Experian began working with another rent-reporting service, Credit Builder, which letting agencies and landlords can sign up to; their tenants must consent to having their data reported to Experian as part of their tenancy agreement. “For reliable tenants it means that they can build their credit score, and for landlords it means that people will be focused on paying their rent on time,” says Henry Yates, Credit Builder’s founder and chief executive.
Equifax, another credit reference agency, says it recognises the benefit of recording rental data and is installing a new system, while Callcredit says it is looking into it. Lenders take into account a host of factors when considering your mortgage application, and they choose which credit reference agency they approach for information about you. But rental payments — surely one of the clearest indicators of someone’s financial dependability — are not routinely used to assess a person’s creditworthiness.
If services such as Credit Ladder and Credit Builder were to become more mainstream in the UK, it would be a boon for millennial renters trying to prove themselves to lenders, and particularly beneficial to students and young professionals with little credit history. It would not only help them to access mortgages, but also other financial products, and at better rates, which might ease some of the dispiriting pain of trying to get on the housing ladder.
