Reliable tenants should benefit from good credit scores
Moves for punctual rent payments to be added to the credit scores of tenants are likely to become law sometime this year, it is hoped.
Campaigners say the inclusion of tenants’ rent payment histories when calculating credit scores would not only provide a huge incentive for future home buyers, but also give landlords a clearer picture of a prospective renters’ payment history and financial situation.
Neil Cobbold, chief operating officer of automated rental payment provider PayProp in the UK, said: "Many tenants have been paying rent on time for years, if not decades.
"The fact that this does not carry the same weight as a mortgage payment is hard to believe.
"Thanks to the rapid growth of the private rental sector, more tenants are paying higher rents.
"Taking cognisance of rent payments would therefore make perfect sense, encouraging the next generation of property buyers."
The prospect of a better credit score would not only motivate tenants to pay their rent on time each month, but would also improve the cash flow of landlords and reduce rent arrears, he said.
The campaign has been gaining momentum over the past few months.
An online petition attracting over 140,000 signatures forced MPs to debate the issue in Parliament in October.
Big Issue founder Lord John Bird launched the Creditworthiness Assessment Bill which pledges to ensure that tenants' rental payment records count towards credit ratings.
The Bill passed its Second Reading in the House of Lords at the end of November and will now have to pass a Report Stage and Third Reading before passing through the House of Commons.
And in last year's Autumn Budget, the government set aside £2 million for technology entrepreneurs working to develop an application that can allow the relevant data to be recorded and processed.
The Rent Recognition Challenge will provide funding to the six best proposals to help develop them into workable products.
"Recording and counting rent payments towards credit scores is a modern phenomenon and therefore it needs a modern solution," said Mr Cobbold.
"That's why this is a fantastic idea and one that shows the government is keen to embrace the PropTech revolution.”
Numerous PropTech firms are now working to make the process more transparent and effective for letting agents and their landlords, he added.