Credit History Is Good
A good credit history is important for anyone to have. Credit is a necessary part of life for most of us. Building a solid credit history can have a dramatic impact on your quality of life now and in the future when you’re considering applying for a loan, a mortgage or even a mobile phone contract.
Unlike traditional methods of building credit, paying rent does not involve getting a loan and showing your ability to repay your loan. Rent payments, just like mortgage payments or utility payments, are financial commitments and as such your payment performance history indicates your ability to adhere to your commitments.
Unlike loans, credit cards etc, rent reporting requires you to opt-in for your rent performance data to be recorded and reported. Reporting your rent will allow you to build your credit history and credit score.
I think that in the not too distant future it might become a legal requirement to report your rental performance data.
How Rent Reporting Helps
Rent reporting will help you have a more in-depth credit history and boost your credit score if you make on-time payments and are not behind on your rent. This will allow you to qualify for better interest rates on loans or credit cards which could save you a lot of money on interest rate charges.
Currently, in the UK only Experian collects and stores rental data on a tenants credit file. This means that the lender you take your loan out will need to be using an Experian service to find your credit file (and creditworthiness) for you to see much benefit from rent reporting at the moment.
This will undoubtedly change in the future as the remaining two credit bureaus( Callcredit and Equifax) begin to collect and store rental payment performance data on tenants credit files.
What’s In Your Credit Score
At the moment there are five core sections that affect how your credit score is generated.
- Your payment performance history on loan products, credit cards etc
- Your debt utilisation on your overdraft or credit cards
- Hard searches by lenders
- How long you have had each account on your credit file
- The types of accounts you have.
Your payment performance history usually represents a significant factor with a weighting of at least 35% of how your score is generated.
We partnered with Experian over a year ago and continue to work closely with them in helping define how tenants want to benefit from having their rent payments recognised.
Younger tenants have much to benefit from rent reporting as they usually have thin credit files meaning they could graduate from uni without a strong enough score or in-depth credit history to attain credit products such as credit cards.
For those who don’t even have a credit file, this opens the door for them to build up their scores and file gradually.
Rent is usually the largest monthly expenditure for most tenants. Why not get credit for it?