Credit is a funny thing to most but at some point or the other in most of our lives we will need it, it might be for short term or long term, for entrepreneurial motivations or for that shopping spree we have so desired down on regents street… or it might just be for an emergency.
Credit, credit history, credit scores all have a great irony about them. To get or build your credit score you will need financial products or commitments. In most cases to access these you will need a credit score. So here comes the dilemma for most teenagers and new undergraduates. I can't get a phone on contract because my credit file is too thin or non existent. So just how do I boost my credit score or plumo up my thin credit history.
Financial commitments… well that's a whole lot easier typed than achieved. Firstly you must cater for the simple things which don't require any commitment whatsoever. E.g registering to vote. This is hands down the simplest thing you could do to establish a credit file. Opening a bank account also helps you build up a history as this is noted on your file with a start date. In some cases you may be able to get a phone contract without much need for a credit file. Luckily, most phone contract providers report your payment history to the credit bureaus who stick this in your credit file. With little steps like this you can begin to build a credit file.
More importantly than most, rent. Renting is hands down the biggest recurring monthly cost most teenagers will have and you should get credit for paying your rent on time. The rental exchange has been implemented to cater for this exact scenario. By reporting your rent payments to the credit bureaus you will gain benefits similar to what those who pay a mortgage or repay a loan will get on their credit file. You credit file will be more in depth and your credit score will rise if you make “on time” payments.
So how does it all work?
At this point out of the 3 credit bureaus in the UK, only 1( Experian) is offering this solution at the moment. Experian collects rental performance data from credit reporting agencies such as Rentroster by Huuti. This data is then stored on your Experian credit report which you can view at any time.
To report your rent you simply have to sign up to Rentroster, input your tenancy details and your landlords details, choose a method by which you want to pay your rent and that's it. Done. It is not possible to report your rent directly to the credit bureaus.
Your rent will be collected on its due date and sent to your landlord instantly.
Rentroster will then update its records and send this to Experian on the 1st of Each month.
Paying your rent on time is important as paying late will have a negative effect on your credit file. You should do your best to ensure you pay your rent in full every month.
As you can imagine, the benefits of reporting your rent payments are good as of now but should be immensely better as soon as the remaining two credit bureaus( Equifax and Callcredit) sign up to the rental exchange and begin collecting rental performance data.
In the meantime the benefits of reporting your rent can only be felt through lenders who use an Experian credit scoring model to assess your creditworthiness before offering you credit.You must be sure to enquire from the lender prior to making an application so you are certain you reap the benefits of reporting your “on time” rent payments.
Rent reporting is relatively easy to do and could just boost your mortgage affordability and open the door to cheaper rates and access to more financial products.