One step closer to mandatory adding of rent payments to credit scores
The House of Lords has given the Creditworthiness Assessment Bill its second reading and a step forward to ensuring that tenants’ rental payment record counts towards their credit rating.
The Bill, moved by the founder of Big Issue, Lord John Bird, now moves to the committee stage of the Lords and appears to have growing all-party and government support, suggesting it is very likely to become law at some point in 2018.
Lord Bird, during the debate, put his case like this: “If you are a mortgage holder, and if you pay your mortgage on time and do not miss it too often, you will automatically have a higher credit rating, because the credit agencies will look at you and say that you are a jolly good chap, woman, student or whoever.
“But you might have been living in social housing, or in another form of rented accommodation, for one year, five years, or 10 years. There are the boxes to be ticked at the bottom of the form saying, ‘Are you a tenant?’ or ‘Are you a householder?’ and, if you are a householder, that box is ticked.
“If you are a tenant, the paper is normally thrown away, not even considered, or you will be given a very low credit rating, because they do not take into account the fact that you are paying your rent. You could be an incredibly good tenant, paying regularly for many years—or you could be a lousy mortgage holder.”
In essence, what Experian are trying to say is that by not having your rent registered alongside your credit report that it will now be detrimental to your credit score. And by them having all your rent payments data that this will magically give you a better credit score.
In point of fact this is not the case. A renter who has rented their home and paid all their bills on time will have a good credit score whether they rent or own their home.
This system is cloaked behind Experian’s constant smokescreen in trying to gather rental data and assess rental payments on those renters who have paid their rent consistently, in order to sell that data to third parties in order to offer them more loans.
The problem with this system is that landlords, unlike Experian and their directors therein, know that a person with a good credit score doesn’t automatically make them a good tenant. And more importantly, a person with a bad credit score doesn’t automatically make them a bad tenant either.
Many years ago Tenant Referencing UK’s founder Paul Routledge was approached by Experian to do exactly this. He vehemently refused because he didn’t agree with the principle, as a credit score is used for applying for loans, credit cards, etc and not for hire purchase agreements which should not be intertwined but run parallel to one another; in order to give a clear vision of the entire rental history.
Four years ago Experian attempted the same idea with social housing rent payments, where they planned to collect tenants data to create a real-time rental database in order to establish or improve a tenants existing credit rating based on their track record of regular rental payments. This would give social housing tenants the opportunity of inclusion within the PRS so said Experian. The truism of this was an obvious data gathering exercise to sell the data of consistent rent payments to third parties to be able to offer loans.
It’s safe to say that the buy to let industry does not need any more complications.
A Tenant History is a history of how someone has dealt and lived within their home in real-time. The way you look after your car, the fuel you put into it and how you conduct yourself is relevant to the sale of your car at a later date; so to run these two in tandem is extremely dangerous for the industry as a whole.
The real question here is: How are they going to safely (and legally) monitor this ‘Rental Exchange’ database?
As a leading tenant referencing company ourselves we have a clear understanding of how large credit conglomerate’s work; via automated computer systems, which are clearly not geared up to be on a “one-on-one” basis. With 8 years experience in gathering real-time data behind us, we understand that to survive and grow it is paramount to work closely with all individual data suppliers (landlords and letting agents), otherwise the data could become corrupt and dangerous to tenants.
As we feared 4 years ago, we see this as just another attempt by Experian to climb up the credit ladder. So we call on them to realise the true impact of what they’re trying to do, otherwise these poor tenants will be used as the rungs on their ladder; making the big businesses richer and the private renters poorer.
Databases containing tenants rent defaults are obvious advantageous to landlords – but what database can store whether your applicant tenant is a drug dealer or illegal immigrant? None, and for the simple reason that this does not comply with The Data Protection Act 1998. The Tenant Referencing UK database is the only one of its kind that can tell you these types of things without breaking data protection rules – simply because we put landlords and letting agents in touch with one another to find out what their applicant tenant is really like.
This is where Tenant Histories at Tenant Referencing UK is completely different.
It is not about big databases being used for financial gain by huge financial conglomerates but about communities of landlords and tenants using databases for the specific purpose of giving tenants better homes and protecting landlords from losing their investments. At Tenant Referencing UK we have created a community of pro-active landlords and letting agents to simply protect one another from rent arrears, property damages, anti-social behaviour, illegal subletting, criminal activity, and so on. Our data systems are manually data-controlled as we fully understand the importance of direct personal contact with our vast community of property professionals.
So if you’re looking for a total support package that will allow you to avoid bad tenants from crossing your path, please click here to join the fastest growing landlord community today.
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