Lord John Bird, the founder of Big Issue, is tomorrow launching his own Bill in the House of Lords in a bid to have rental records included amongst the criteria used to assess people’s creditworthiness.
Bird - a cross-bench peer - says the rental payments of the UK’s 11m private and social renters are not recorded and so do not count towards, for example, an individual’s application to secure a mortgage.
It means many of the country’s least well-off tenants may be obliged - despite excellent rental payment records - to have repayment contracts on hire purchase schemes which are more expensive than those offered to owner occupiers.
“If you are a rent payer, even if you pay your rent on time for many years, it won’t necessarily get the credit file that you would if you were paying a mortgage. So we’re trying to help reliable rent-payers get the same advantages as reliable mortgage payers” says Lord Bird.
At present, credit rating agencies do not routinely include rent payment history when calculating credit scores. This means a tenant can find it difficult to access a mortgage, even if they have a long history of rent being paid in full and on time.
This follows the success of an online petition, signed by 147,307 people, saying: "paying rent on time [should] be recognised as evidence that mortgage repayments can be met".
The idea already has the backing of the Residential Landlords Association; it surveyed almost 3,000 landlords with 61 per cent of respondents supporting such a move.
Including rent payment would also support landlords, the RLA says, providing them with a more accurate assessment of a prospective tenant’s credit and rent payment history.
Some lettings agencies have already participated in an experiment conducted by global information services company Experian; its Rental Exchange scheme helps private tenants strengthen their credit histories simply by Experian recording their rental payments.
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Wholeheartedly agree with John Bird on this - rent payments should count towards a better credit file. We already provide this service for Landlords and Letting Agents and you can too by registering at www.RentalStep.co
Be careful what you wish for. Letting Agents will use this information to assess the credit worthiness of new tenants. Where will the poor payers live?
What stops financial institutions contact the Agent/Landlord now?
Getting refused for a credit card for a poor credit history is not really that important but finding somewhere to live with poor payment record is only going to cause more difficulties.
What about wife’s who find themselves left with the children when the husband runs off and has to wait six weeks or more for her claim,
People made unemployed when companies cease trading. There are lots of examples where genuine cases will suffer or do you suggest we massage their payment records
We are interested to hear the second reading of the Creditworthiness Assessment Bill in the House of Lords today. At CreditLadder we strongly believe that this a benefit to tenants as they one day look to own their own home. Equally, as tenants are encouraged to pay rent on time it can ultimately benefit your agency and your landlords through lower arrears across a managed portfolio.
Please do contact me for more information and I would be more than happy to arrange a call at your convenience to discuss further, asa@creditladder.co.uk.
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