It’s a tale familiar to many who form part of ’generation rent’. You have a job, pay your rent on time and have been saving hard for a deposit on your first property. But you can’t get a mortgage because the affordability checks carried out by most lenders are stacked against you.
This is because rent is not widely recognised in credit scores, making it much harder for renters to get a mortgage or take out a car loan. Mortgage payments, on the other hand, help homeowners improve their credit history. Now things are changing, thanks to the emergence of rent reporting services such as those operated by CreditLadder.
Reporting your rent
“CreditLadder reports your rent payments directly to Experian, the UK’s leading credit reference agency,” Sheraz Dar, the company’s chief executive, says. “By making rent count, in the same way mortgage repayments do, we can make a difference to the creditworthiness of millions who are currently under-served by mainstream lenders."
Founded in 2016, the platform has already reported more than £75 million in rent payments. Recently, the company was announced as a final stage winner of the HM Treasury’s Rent Recognition Challenge and became one of 20 companies chosen from nearly 100 applicants to join the HM Treasury-supported Tech Nation programme.
The platform couldn’t be more opportune, as growing numbers of young people are renting their homes for longer periods than their parents did. Only two per cent of people aged 30 years or younger have an ’excellent’ credit score.
This is to do with the ways that credit scores are calculated. You may, for example, be a ’credit virgin’, someone who has never applied for a loan, an overdraft or a credit card, and find it hard to access credit because you’ve got no history of repaying loans. “Between 10 and 12 million people in the UK are classified as ’non lendable’ by mainstream lenders,” Sheraz says.