Reckless renters watch out - soon if you’re in arrears with your rent, or dare to do a moonlight flit, it could go down as a black mark on your credit file making it difficult to get credit cards or a mortgage.
Credit reference agency Experian is launching a service, Rental Exchange, that will allow landlords and letting agents to register information on tenants’ arrears or defaults. It can be accessed by other landlords - and mortgage lenders - when considering a prospective tenant or borrower.
There are an estimated 3.6 million tenants in the UK, all of whom are potentially affected as an increasing number of landlords and letting agencies are likely to use the service to avoid problems with future tenants.
Credit reference agencies keep details of credit card and loan repayments, any defaults, late payments or County Court judgments on file for as long as six years. But up until now they have not recorded rental data.
Of course, if you are a good tenant, pay the rent on time and don’t leave without paying the final month’s rent, this information will also be recorded and will be a plus point when you come to apply for a mortgage or loan.
The service is not yet available and fees have yet to be set. “We are collecting data and expect to launch towards the end of the year,” says James Jones of Experian.
Nobody knows how many residential letting agents there are in the UK but it is probably tens of thousands and the number has been growing fast as demand for rental properties has increased.
“Tenants will be able to access the information which will be contained in their credit report and we are building in safeguards so that if rent is paid late through no fault of the tenant – for example if Housing Benefit is paid late – they will not be penalized,” says Jones.
Landlords will have to ensure that new tenancy agreements contain a clause which will require tenants to allow access to the data. Landlords and lettings agents using the Rental Exchange will only have access to information about a potential tenant’s past rent payment history - not the other financial information held on file.
“As renting increasingly becomes a lifestyle choice for many Britons, it is important that the process for credit scoring accurately reflects a tenant’s status and rent payment history to enable them to have fair access to affordable credit and services,” commented Nick Jopling, executive director of Grainger, the UK’s largest listed residential landlord. “Sharing this data will have major benefits for both landlords and, more importantly, our tenants.”
But it could make life difficult for those struggling financially. Latest figures from the Consumer Credit Counselling Service show that tenants living in rented property are likely to be hardest hit by the economic squeeze and debt advice agencies report record numbers of tenants looking for help with rent arrears.
According to LSL, the UK’s largest letting agency, over 10 per cent of rent is in arrears at the end of January this year.