Can renting improve your credit score?
Until just a few years ago, regular rent payments were not included on a credit report. Rent wasn’t treated like other factors that affect your credit score, such as keeping track of regular repayments on mortgages. Lenders that provide mortgages or loans are considered to be creditors, so your repayments to them appear on credit reports. However, landlords, lettings agencies and other property management companies aren’t considered to be creditors. This meant that no record of regular payments made on time, nor late payments, would be taken into consideration on credit reports.
For tenants, this means that regular, timely payments – often the same or higher than average mortgage payments in some areas across the UK – can now be included on a credit report. This can potentially help with mortgage applications and other tenancy agreements. For people with little or no credit history that need a way of building up a credit profile, this can be very helpful. In fact, statistics show that around 79% of renters could see their credit score improved this way.
How do I get rent payments to show up on my credit report?
Rental Exchange is an organisation that has introduced a way of adding your rent payments to your credit report. This is done through partner organisations that are able to handle this process. When you’re set up with a Rental Exchange partner, all you need to do is update your credit records when payment is confirmed. These services are often free for tenants, and you can still use them if you’re privately renting or in social housing.
Once set up, all you really need to do is keep paying your rent on time and recording it with your credit reference agency. Through the Rental Exchange company, your regular rent payments are recorded and verified. This verified information allows you to update your credit report, which provides proof of your timely rental payments.
How do Rental Exchange schemes work?
- Sign up with a Rental Exchange partner (you may need to provide details about yourself, your property and your landlord or lettings agency)
- Connect the details of the bank account you use for paying rent
- Payment is made through the Rental Exchange partner, which pays your landlord or lettings agency the same day
- The Rental Exchange partner verifies your rent payments
- This verification can be added to your credit report, which can be helpful for improving your credit score
It should be pointed out that rent payments made before signing up with a Rental Exchange service can’t be added to your credit profile. You can only add rental payments made after you’ve signed up.
How does Rental Exchange work with landlords?
Tenants may need to register with a Rental Exchange partner when privately renting to a particular landlord with one or a small number of properties. However, larger housing organisations and groups may already be set up to give rental details to a Rental Exchange partner. This may be something you need to talk about with your landlord or property management organisation in case you need to opt in to the service.
You can also check with your landlord if you are living in a social housing property, or a council house, as they may be required to report your payments. You can also report to a Rental Exchange partner, like CreditLadder or Emma, yourself if these options aren’t available.
Other than that, there’s usually very little that landlords really need to get involved in. They still get their rent as usual, while you have confirmation of payment. The added benefit is that by adding your details to the Rental Exchange system, this can help with credit checks for renting in the future.
How does my credit score help me get a mortgage
Adding your ongoing rent payments can help to improve your credit score, either for moving to another rented property, or if you’re thinking of buying a home. Like with other credit agreements (loans or credit cards) making regular, on-time payments can be indicative of positive and responsible credit behaviour. If you’ve missed payments, it may suggest to lenders that you’re in some sort of financial difficulty and may have trouble paying back any new credit repayments should they give you a mortgage. Keeping up with repayments is one aspect of building a credit score as mortgage providers may look at other factors before agreeing to offer a mortgage.
This article was written on 23 July 2021; all information was correct at the time of writing.
Find further information on understanding credit in our Knowledge Centre
- Hard vs Soft Credit Searches
- Can Renting Improve Your Credit Score?
- What is a credit rating?
- What types of credit can you get?
- Credit agreements – the basics
- What happens to credit history when moving abroad
- Explaining compound interest
- Getting credit with no credit history
- Credit Myths - The truth about Credit
- Soft credit searches explained
- Your Credit Limits: Do’s & Don’ts
- What is a credit blacklist?
- Infographic: Back to basics – how do credit reports and scores work?