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January, 2018
Could adding rent payments to credit scores help tenants become future buyers?

The growing movement to ensure that rental payments are added to credit scores as a mandatory requirement could provide a huge incentive for the next generation of home buyers.

Automated rental payment provider PayProp says this measure, combined with the recent stamp duty cut for first-time buyers, means tenants could soon be in their best position in years to get on the property ladder.

Benefits for tenants, landlords and letting agents

Currently, credit agencies do not, as a matter of course, include tenants’ rent payment histories when calculating credit scores – missing an opportunity to make mortgage funding accessible for some tenants.

Neil Cobbold, chief operating officer of PayProp in the UK, had this to say: "Many tenants have been paying rent on time for years, if not decades. The fact that this does not carry the same weight as a mortgage payment is hard to believe.

Thanks to the rapid growth of the private rental sector, more tenants are paying higher rents. Taking cognisance of rent payments would therefore make perfect sense, encouraging the next generation of property buyers."

Cobbold says the prospect of a better credit score will give tenants even more incentive to pay their rent on time each month, something which would benefit the cash flow of landlords and letting agents, and contribute towards reducing rental arrears.

In addition, landlords and agents referencing tenants would benefit from having a better idea of prospective renters’ payment history and financial situation.

Industry campaigning again makes a difference

The move towards including rent payments in credit scores has gathered significant momentum over the last year. Following regular campaigning by several industry organisations, an online petition attracting over 140,000 signatures forced MPs to debate the issue in Parliament in October.

After the debate, Lord John Bird - the founder of the Big Issue - launched the Creditworthiness Assessment Bill which pledges to ensure that tenants' rental payment records count towards credit ratings.

The Bill passed its Second Reading in the House of Lords at the end of November and will now have to pass a Report Stage and Third Reading before passing through the House of Commons.

Despite still having to pass through several Parliamentary requirements before receiving Royal Assent, the Bill has gained significant cross-party support and is thought likely to formally become law at some point during 2018.