So you've got an aspiration to buy your first home. Perhaps you've already found somebody to share with and you're busy saving away. You know that your credit score and report is important to mortgage lenders. Why on earth aren't your regular, timely rental payments, given how expensive they are, taken into account in credit terms and allowed to boost your credit rating?
The brilliant news is this looks to be changing. Share a Mortgage has spotted many tech-driven initiatives announced in media reports which effectively put the renter on the same footing as mortgage holders in terms of firming up your credit record and which could greatly help you secure your mortgage to buy your own home.
The Rental Exchange
Experian, one of the 3 main credit reference agencies, has teamed up with The Rental Exchange (click to find out more) to create a new scheme where your rental payments are fed through the latter organisation in such a way as become a weighted feature in your credit report.
The Big Issue Invest, the social investment arm of the Big Issue magazine, is a partner in the scheme, which was originally developed only for social housing tenants.
It's important to note that the scheme involves no cost to tenant or landlord.
Tenants get an extra incentive to pay rent on time
From a landlord's perspective, the scheme gives tenants another incentive to make rent payments on time and the concept has already been worked on by the Residential Landlords Association (RLA) - apparently, some 61% of landlords, among an RLA survey of 3,000 support the move.
FirstHomeCoach - coming soon
FirstHomeCoach, developed by a company called META, came about because META won some of a £2 million fund put up by HM Treasury to be awarded to financial technology companies which better enable the UK's 11 million renters to record and share their payment data with financial institutions.
Once again, renters who pay on time would benefit by being able to improve their credit scores, which gives them a much better chance of securing a mortgage in future or indeed other large loans.
This app, still in the development stage, captures user's rental payment data via Open Banking and then corroborates it against publicly available data sources. It enables a rental report on the user to be created, which can be passed on to interested financial concerns to establish the user's credit worthiness.
More work needed for better inclusiveness of smaller landlords
The Rental Exchange's offering has been criticised by the RLA because smaller landlords are currently forced to go through another layer of bureaucracy to use its product: rents first have to go through an organisation called 'CreditLadder' before being passed onto them.
However, an Experian representative defended the product in media reports by saying that tenants would be able to self-report their rental payment via open banking: they would be able to allow organisations to view their online back account data securely to see any payments made.
Open Banking - the enabler
All reports indicate that these initiatives have been enabled and boosted by Open Banking, launched in January, which gives banking users greater control over their personal banking data and allows them to share their data with companies and organisations which they choose.
