This Is How Paying Your Rent Can Help Improve Your Credit Score

Keeping a roof over your head is probably one of your biggest outgoings month to month. If you own your home, then the payments you make towards your mortgage not only help you towards owning your home outright one day, they can also improve your credit score, since you’re repaying a rather large loan.

But what about if you’re a renter? Even though you’ll usually have to go through a credit check before you move into a new rental property – just as you would before applying for a mortgage – and rent payments are often more expensive than monthly mortgage payments are, paying your rent every month doesn’t automatically get recorded in your credit report like mortgage repayments. So, you don’t automatically get the credit score boost that can come with showing you’re able to keep up with your obligations. This means that to get the credit score benefits that come with paying a sizeable bill on time, you’ll need to take action for yourself. Read on to find out how!

What you need to do to get your rent included in your credit report

To get your rent included in your credit report, you’ll need to sign up with a service that acts as a “middle man” between you paying your rent and the credit reference agencies who gather up information about everyone to put into credit reports. There are a few of these around: Credit Ladder and Canopy are two of the leading ones. To sign up with them, you’ll need to verify your identity, provide some information about your tenancy and connect your bank account so that they can spot your rent payments being made, and then update your credit report.

How do these services work?

Credit Ladder and Canopy (through their RENTTRACKING™ service) both offer free services that use Open Banking technology to scan your account for your rent payments being made, and then every month when you pay your rent, they see this happen and pass the information on to a credit reference agency. Canopy only report to Experian for free, but if you pay for a premium subscription then you can also get your rent payments reported to Equifax.  Credit Ladder give you the choice between reporting to Experian, Equifax, or TransUnion on their free subscription, or if you upgrade to their paid-for subscription, they’ll report to all three.

At CredAbility, we show you a copy of your Equifax credit report. So if you’d like to see your rent payments in your CredAbility account, then signing up with Credit Ladder will help you do this.

Is it safe to give Credit Ladder or Canopy access to my bank account?

The short answer to this is yes!

The Open Banking technology that’s used by both Credit Ladder and Canopy gives them “read only” access to your bank account. This means they can essentially look, but not touch. They can see all your transactions, but the access they have doesn’t give them permission to take anything from your account. So, your money will be safe.

The technology being used by both Credit Ladder and Canopy can only be used by companies who are registered with and regulated by the financial services regulator in the UK, the FCA (Financial Conduct Authority), which helps stop any information from falling into the wrong hands.

Can I ask my landlord to report my payments to a credit reference agency instead?

Maybe, depending on the type of property you rent, and how many properties your landlord owns.

The idea of getting your rent included in your credit report so that it can help your credit score first came to life in the Experian Rental Exchange programme. This programme supports tenants, but also gives landlords a way to report that you’ve paid your rent, so it can be counted towards your credit history. It doesn’t cost landlords anything to join the Rental Exchange, so if your landlord is eligible to join and hasn’t already, there’s no reason for them not to!

Currently, you can only ask your landlord to report your rent payments for you under the Experian Rental Exchange if you rent your home through your local council or a housing association, or if your landlord (or the agent you deal with) has more than 500 properties. And, of course, this will only get your rent payments reported to Experian, not the other credit reference agencies.

If you rent your home from a smaller private landlord or letting agent, and/or if you’d like your rent payments to appear in your credit report with other credit reference agencies as well as Experian, then using tools like Credit Ladder or Canopy is your only option at the moment.

How does paying your rent help to improve your credit score?

One of the most important things that lenders are looking for when they decide whether to offer you a credit card or a loan is evidence that you keep up with all your other financial obligations: your credit payment history. Seeing your rent get paid every month, even though it’s not technically credit like a mortgage is, provides lenders with the evidence they’re looking for and helps show them that you’re a reliable person to lend money to. This, when looked at alongside how much you can afford to borrow and repay, your other credit history, and the lender’s own criteria, can mean you’re more likely to get approved for credit than you would have been without your rent payments in the picture.

Getting your rent included in your credit report is particularly useful if you’ve chosen not to have a credit card or use loans so far, or have struggled getting approved because of a limited credit history or some mistakes in your past, but need to show that you can and will stay on top of your commitments to be approved for credit – in particular, a mortgage – soon.

Even if you’re not looking to apply for a mortgage or other credit, getting your rent included in your credit report now can help you as and when you decide to do this, or if and when you move into another rented property. Your new landlord will be able to see that you have a good track record of keeping up with your housing costs when they review your application to rent their property, which can help you get through their checks more easily, too.

Stay on your guard, though: paying your rent on time helps your credit score improve, but if ever you find you can’t pay on time, or at all, then this could affect your credit score negatively.