Ain’t nothing going on but the rent these days. From renting our homes to subscription-based services where we pay monthly, the UK is becoming a nation of renters – and it’s no bad thing. Renting provides the type of flexibility and freedom that is hard to find with something like a mortgage.
It turns out that renting can also help boost your credit score, with rental payments counting towards your monthly report. But how exactly does it all work, and what does it mean for your future credit rating?
We’ve been doing some digging and have all the latest information on how renting can help improve your credit score. So, read on and find out everything you need to know about creditworthiness and how it relates to renting your home.
What is a credit score?
Credit scores are a pretty big deal and dictate your ability to borrow money. A credit report is a tool used by lenders to determine if you qualify for lending, whether it’s a mortgage, loan, credit card or other services related to finance.
Credit reports typically come from three sources, Equifax, Experian and TransUnion, though other companies employ their services to provide their customers with a score. You may have seen the ClearScore adverts, for example, who offer a free credit report. However, they use the data provided by Experian.
The higher your score, the better your chance of getting credit. So the aim is to have good credit, get a high score and attain more access to financial products. Sounds easy enough, but there are a few things that go into having a good credit score.
What makes a good credit score?
There are many factors that contribute to building and maintaining a solid credit score. Some of the most important aspects include:
- Making payments on time for things like utilities in your home, mobile phone bills et cetera
- Paying more than the minimum amount on your credit card
- Not having a county court order (CCJs)
- Never having been declared bankrupt
- Having a financial history, such as previously borrowing money
- Not applying for multiple credit cards and loans at the same time
- Not having been previously refused for credit
There are also some non-financial related things that you can do to improve your creditworthiness. These include:
- Registering on the electoral roll
- Reviewing your credit report at least once a year to see where you can improve
- Close old accounts that you don’t use anymore
How does a credit score impact your ability to rent?
Before renting a home, you will need to go through tenant referencing. This is often carried out by the landlord or letting agent and includes a credit score. A poor credit score doesn’t necessarily mean that you won’t be able to rent your next place, however, as the decision is down to the property owner.
Still, a good score will significantly increase your chances of getting the keys to your new home with minimum fuss. A higher credit score, combined with a positive tenant reference, will ease the process of renting an apartment.
Do rental payments contribute to your credit score?
Previously, paying rent had no impact on your credit score. Which, when you think about it, is rather unfair considering that you’re regularly making a large financial outlay each month. Fortunately, things have changed in the last couple of years, and you can now record your rental payments, which go towards boosting your credit score.
The creditworthiness assessment bill means that rental payments count towards improving your credit. There are companies who now take your rental payments and record them so that the rent you pay is included in your credit score. So now paying your rent on time means you are likely to benefit from more access to lending.
All the credit
With a good credit score, you can feel confident about moving into your next home stress-free. And regularly paying the rent on time each month will boost your overall score, giving you access to better lending opportunities and generally making everything that little bit easier for you.