Rent isn’t strictly classed as credit, therefore payments aren’t currently recorded on your credit report… but could that change?
A petition surrounding the issue was set up by a construction worker from Plymouth. In it, he says he has ‘paid £70,000+ in rent on time yet still struggles to get a mortgage.’ And that he wants ‘paying rent on time to be recognized as evidence that mortgage repayments can be met.’
Since starting the petition, it has achieved more than 147,300 signatures from people who are in agreement. Because of the huge support the petition has had, Parliament debated the issue on Monday, 23rd October.
Why are renters so interested in this change?
The biggest benefit of showing rent payments on a credit report is that it would act as evidence to lenders that the tenant can afford a big monthly outgoing, as long as they made their rent payments on time. This would help them get approved for a mortgage in the future as it shows they're a safe candidate.
For most people affording a home is hard enough – and tenants argue that it’s unfair they’re often declined for a mortgage when they’ve consistently paid their rent and successfully managed their outgoings.
With the situation only getting tougher, tenants who want to buy need all the help they can get – and having rent payments recorded on their credit report could help them make the jump to homeownership (providing that they pay their rent on time and in full).
Renting is more expensive than homeownership
According to statistics from Halifax, the average monthly cost of renting a three-bedroom house is £759. That’s higher than the costs associated with a mortgaged property of the same type, which is £705.
Conservative MP Paul Scully, who introduced the debate on Monday, said: “it is clear that in many cases if someone is renting, they can afford the equivalent mortgage.”
However, the government responded with: “Meeting rental payments is not sufficient in itself to demonstrate affordability over the lifetime of the loan.” And that “lenders must consider a range of factors when assessing a mortgage application.”
Sign up to Credit Ladder
Don’t worry – there is something you can do about it. Sign up to Credit Ladder today! Working in association with Experian, Credit Ladder helps tenants build their credit score for free.
Here’s how it works…
Step one: you pay your rent on time to Credit Ladder.
Step two: They inform the credit reference agency who’ll add it to your credit history.
Step three: Credit Ladder then transfers the payment to your landlord or agent – it could even be on the same day, so everyone’s happy.