Rental payments recognised in credit reports for the first time
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For the first time ever, tenants will be able to use the fact they pay their rent in full and on time to help build up a better credit score and credit history. That’s because Experian and the Big Issue Invest (their social investment arm) are working with over 150 social housing providers, enabling agents and local authorities to have renters’ data reported into the Rental Exchange initiative. It’s also hoped that renters will be able to report their rent paying data themselves.
This was all sparked off by a petition with around 150,000 signatures demanded that paying rent should be recognised as evidence that renters could afford to pay a mortgage. After all, this seems a bit of an anomaly as paying a mortgage often costs less than a renting a place.
Improving credit scores through rent
By being able to add successful rental payments to their credit file, renters should benefit from a higher credit score. And of course, having a better credit score and credit history can help with getting a mortgage application approved in the future.
It’s hoped that about 80% of tenants should gain a better credit score once lenders start reviewing property rental information. But it’s not just about gaining an improved credit rating; it’s hoped that this initiative will also help prove renters’ identity online. And, all this in turn should help open the doors to a broad range of financial services that they’re excluded from at the moment.
Experian lists the top four ways of gaining a better credit rating as:
- Be reliable when it comes to paying bills. This is because, as with much in life, past performance is seen as a good indication of future performance. So be sure to pay bills on time and in full, from credit card bills to car loans, but also mobile phone bills and bills for utilities. And if you’re behind with payments, get them paid as soon as possible.
- Watching how much of your available credit you’re using. Known as your ‘credit utilisation ratio’, lenders prefer it if you use around as little as 30% of your available credit. Maxing out your credit cards will hit your score. Only using a low amount of the credit available to you is one of the best things you can do to improve your credit score. So, try to pay off debt and keep those card balances as low as possible.
- Only opening new credit accounts if you really need them. No explanation needed.
- Not just moving debt around. It will probably hurt your credit score if you pay off one credit card but end up adding the same amount to another of your cards.
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