If you decide to buy a home and you need a mortgage, your lender will look at your credit file. The file will show any credit you already have or have had in the past and how it was paid. If you have always paid your bills on time your credit rating should be good. If you have made a regular habit of paying later or you have County Court Judgments your credit rating will be poor.
Nowadays, with spiralling property costs many more people than in the past are having to live in rental properties rather than buy their own homes.
One of the payments homeowners will have on their file is their mortgage payment. This will help them get another mortgage, or other types of credit because a lender can see that the payments have been made regularly and on time. Unfortunately, if you are a tenant your rental payments are not included in your credit file and therefore a lender has no credit history to rely on.
However, credit agency Experian have realised that this system is unfair, and they have come up with a scheme which will help tenants who want lenders to see that they are responsible borrowers. Anyone can join the scheme as long as they have the consent of their letting agency or landlord.
Once you have become a member you pay your rent by Direct Debit to a company called Credit Ladder. Credit Ladder then pass on your rent to the landlord or letting agency and they also let Experian know that the payment has been made on time and it’s put on a list in your credit record.
That means that any lenders who check your Experian file will see that you are a responsible borrower, and this will help you if you want to take out a mortgage in the future. It will also help you if you want a loan, you apply for a credit card or you want to open a bank account.
At the moment the scheme will only show up on Experian credit files, but according to Money Saving Expert, the two other big credit agencies, Callcredit and Equifax are investigating ways to recognise rental payments and there has been a debate in Parliament calling for rent payments to be recorded on a person’s credit score following a petition signed by over 147,000 people.
If you want more information about the Experian scheme, have a look at the Credit Ladder website
which will give you more information.