How pay­ing rent reg­u­larly can help credit rat­ing

Yorkshire Post - - OPINION -

I’VE IN­TRO­DUCED a fair num­ber of Bills into Par­lia­ment as a Min­is­ter, but this week, for the first time in many years, I in­tro­duced a Bill as a back­bench MP. I hope the Cred­it­wor­thi­ness Assess­ment Bill can make a real dif­fer­ence for mil­lions of young peo­ple rent­ing.

At the mo­ment, if you own your home and pay a mort­gage, a lender will take into ac­count your mort­gage pay­ments to as­sess your credit score to de­ter­mine how re­li­able you are to lend to. The higher your score, the bet­ter deal you get on loans, whether mort­gage pay­ments, car loans or even mo­bile phone pay­ments.

But if you were rent­ing the very same home, these pay­ments, how­ever re­li­ably you’re mak­ing them, aren’t taken into ac­count when de­ter­min­ing your credit his­tory.

The Cred­it­wor­thi­ness Assess­ment Bill would change the law so that credit providers such as banks have to con­sider rental and coun­cil tax pay­ments as part of your credit his­tory.

It will help the mil­lions of re­li­able renters across the coun­try and was the brain­child of Lord Bird, founder of the

who has al­ready per­suaded the House of Lords to pass it.

With more and more peo­ple now rent­ing for longer and get­ting on the hous­ing lad­der much later, in­clud­ing po­ten­tially over a mil­lion peo­ple in Yorkshire, hav­ing very lit­tle credit his­tory has big im­pli­ca­tions.

It means loan deals that cost more and mort­gage deals on the worst in­ter­est rates. Renters, who tend to be young peo­ple or those on low in­comes who can’t af­ford to buy a home, and can least af­ford ex­pen­sive credit, end up pay­ing the most for it.

While some young renters may have wider fam­ily sup­port or as­sets that can act as a guar­an­tor for a loan or a mort­gage to re­duce their risk and get a bet­ter deal, for most peo­ple that’s just not an op­tion. It cer­tainly wasn’t for me.

I was part of a gen­er­a­tion that was lucky enough to be able to get on the hous­ing lad­der a lot faster than young peo­ple can to­day. Even so, I spent years rent­ing be­fore I’d saved enough to buy my first home.

And af­ter I left univer­sity and be­gan work­ing, I wasn’t earn­ing much but there were lots of things I needed to invest in, whether get­ting a car for my first job as an au­di­tor, or the work clothes I was ex­pected to wear when meet­ing a client – not quite the jeans and t-shirt look my stu­dent wardrobe was.

Along­side a stu­dent over­draft that I al­ready had, in the end, with ad­vice from my bank, I con­verted it all into a loan so I could get man­age­able pay­ments. But it took ac­cess to credit to help me through that ini­tial time in my ca­reer.

So for all those mil­lions of young peo­ple to­day who are work­ing hard, pay­ing their rent on time, but with an eye on taking that cru­cial next step of get­ting their own home, I think we should make that step a bit eas­ier if we can.

Let’s give them the credit for the fi­nan­cial re­spon­si­bil­ity they are al­ready demon­strat­ing through rent­ing. And for other peo­ple who are just on lower in­comes and un­able to buy a home, or who sim­ply just pre­fer to rent, they shouldn’t have to pay more for day to day credit on mo­biles, or car loans for ex­am­ple, be­cause a lender won’t look at their re­li­able rental his­tory or coun­cil tax pay­ments.

What the Cred­it­wor­thi­ness Assess­ment Bill would do has al­ready been tri­alled with lenders, so­cial land­lords and ten­ants. The re­sults were im­pres­sive. For the renters on the scheme, 80 per cent saw their credit his­tory get bet­ter once the ex­tra in­for­ma­tion of them re­li­ably pay­ing rent was taken into ac­count.

The num­bers of peo­ple with ar­rears also dropped be­cause ten­ants had a real in­cen­tive to pay rent on time in or­der to get a bet­ter credit score. One so­cial land­lord said the level of ar­rears they had af­ter the trial was at the low­est level they had ever seen. So this is a win-win.

A lot of the time in pol­i­tics, peo­ple look for the grand plans to change things for the bet­ter, but some­times it’s easy to miss the sim­ple changes that can make a big dif­fer­ence.

The Cred­it­wor­thi­ness Assess­ment Bill isn’t about en­cour­ag­ing peo­ple who can’t af­ford it to bor­row and be reck­less.

It’s about a level play­ing field be­tween home­own­ers with a mort­gage and renters to ac­cess the credit that helps us all get on with our lives.

I’d never have been able to ever buy my home with­out my first mort­gage. Let’s smooth the way for peo­ple to­day so they don’t have to pay through the nose for the same chance just be­cause they’ve had to rent for longer.

This sen­si­ble change is long over­due. It has cross party sup­port, and I hope that in the com­ing months the House of Com­mons will find the time to have the vote we need to put it into law and help 15 mil­lion renters across the coun­try.

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