Owning a home in the UK has become more of a challenge in the past 10 years. The financial crisis of 2008 led to a review on how people could be ascertained to have “mortgage affordability”. Wages took a sharp decline, inflation rose and to top it up house prices rose faster than ever.
One will think that was where all the bad news ended but no, fewer jobs became available for recent graduates, competition for those jobs rose and a lack of credible government support led us down to where we are today. Fewer first-time buyers are able to get on the property ladder for a variety of those reasons listed above but there is an even bigger problem.
For those who could find a job, cope with inflation and manage to rent a suitable apartment to live in there was a great injustice. Albeit their monthly rent matching what most homeowners were paying per month for their mortgages and their rent payments being a contractual financial commitment, there was no upside to paying rent aside from having a roof over your head.
This is in contrast to the benefits of repaying most financial products and showing creditworthiness by such behaviour. These rent repayments were not being taken into account on tenants credit files. Tenants with good rental payment histories could therefore not see any effect on their credit scores which will no doubt have led them having more access to other financial products on the market such as “Mortgages”. Therein lays the unfortunate catch 22 scenario which is to build credit you need credit and so without credit how do you build credit? This endless loop is easily breakable though. A simple phone contract for a minimal amount over 12 months might help you establish a credit file.
Paying and reporting your rent could however boost your mortgage affordability and put you in a position where getting on the property ladder becomes more of a reality. Through experian and the Big issue invest a solution named “the rental exchange” has arisen whereby tenants can now volunteer to report their rental performance data to experian which is then reflected in their experian credit score.
This means tenants can now begin to see the same benefit as others with financial commitments who display good payment performance.
So here are 4 reasons you should still win.
1)Your payment performance should indicate your creditworthiness
Paying your mortgage on time gets you nowhere aside from a happy landlord and a guaranteed roof over your head for that month. In truth this should reflect your credit worthiness. Rent reporting is now such a vital part of every prospective first time buyer as they can get to “mortgage affordability” faster by improving their credit score and building an in depth credit history with proof of long term financial commitments such as paying rent.Rent reporting helps you indicate your creditworthiness, so why not report it?
- The cost of your rent in some cases is more than you would pay monthly for a typical 20% deposit mortgage on the same property
Paying rent guarantees you a roof over your head for that month at least but paying into a mortgage guarantees you equity which you can sell.You cant sell last month's rent. In most big cities such as London the average monthly rent being paid by tenants far outstrips the monthly mortgage costs being paid on similar homes.If this is the case then why should you not receive as much credit for keeping up to your financial responsibilities in the same fashion a mortgaged homeowner does.
3)Rent reporting is New and picking up pace With just around 10 companies world-wide who currently take rental data and report this to the credit bureaus, it is relatively a new thing and as such there is some fascination about rent reporting.Whilst there isn't any downside to joining and reporting your rent much later(maybe apart from the fact that historic rent isn't currently being reported and all your current and would be past good rental payment performance might not get recorded) there is quite a lot of upside in reporting your rent as soon as possible. You can begin to see the points increase in your credit score in as little as 2 months. Now that's pace.
4)There is no downside
Well, what's the downside?
If you regularly fail to pay your rent on time then you might consider rent reporting a bad thing but beware, this might become a legal requirement to report tenant payment performance so your bad behaviour will have to stop at some point. Why not report your rent as a means to help you get rid of this bad payment behaviour by motivating you to pay your rent on time. In any case, currently you can request for your rental performance data to be deleted from the credit bureau.
Our mission here at Rentroster by Huuti is to ensure every tenant gets rewarded for the rent they pay so they can have a fair playing ground when trying to get on the property ladder and access to other financial products which can increase their standard of living.