Many first time buyers can experience difficulty in securing a mortgage due to not having a sufficient credit history that lenders can assess in support of their mortgage application. However, by signing up for the “Rental Exchange”, tenants can use their history of making rental payments on time as a way of boosting their credit file. So far, over 1 million tenants have signed up to be part of the exchange.
The Rental Exchange was established by the Experian credit agency and Big Issue Invest, the social investment arm of the Big Issue Group. In essence, the exchange treats rental payments in the same way that it treats mortgage payments for the purposes of building somebody’s credit file and credit score. If a tenant signs up to join the exchange then their rental payment history is incorporated into their credit file. The scheme is available to tenants who are in social housing and those who rent privately. In addition to helping a tenant build a credit history, the exchange allows them to prove their on line address and identity. This will help a tenant to prove who they say they are and that they live where they say they live.
Experian estimates that almost 80% of tenants who are participating in the exchange have seen an improvement in their credit score.
In addition to helping build a credit history in support of a mortgage application, participation in the exchange will also help tenants;
- Open a new bank account.
- Apply for a credit card or bank loan.
- Obtain better utility tariffs or qualify to pay for utilities such as gas an electricity via a non prepay tariff.
- Apply for other credit facilities such as mobile phone packages.
- Assist in finding and securing a tenancy at a new property.
Becoming a member of exchange is free of charge to the tenant and the landlord.
However, it should remembered that this scheme “cuts both ways” i.e if you do not make your payments on time, this is also recorded on your credit file and could adversely impact your chances of getting future credit or a mortgage.
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