If you rent your home, you may have heard about the Rental Exchange Scheme – especially in connection with your credit rating.
For a long time, information about paying your rent wasn’t recorded on your credit file – but the Rental Exchange Scheme changed this, potentially helping to improve a tenant’s credit report each time someone pay’s their rent on time.
In this guide, we’ve explored Rental Exchange in detail – so you can decide if it’s something you’d like to be part of, how it can potentially affect your chances of getting credit, and any drawbacks of being included in the scheme.
What is the Rental Exchange Scheme?
The Rental Exchange Scheme was launched in March 2016 as a collaboration between Big Issue Invest (the social investment arm of The Big Issue Group), and credit reference agency Experian. The idea was that it would help tenants build up a credit history in a way that previously hadn’t been possible.
Until this point, renters lost out when it came to their credit file. People who have mortgages had their monthly payment recorded as part of their credit report – but credit reference agencies didn’t record rental payment data. Without rent payments being recorded, it was often tricky for tenants to officially prove that they could keep up with regular monthly payments.
When the Rental Exchange went live, hundreds of thousands of peoples’ rental data started to be used in the same way mortgage payment data was. As a result, Experian estimated that 79% of the tenants who were signed up would see a noticeable improvement in their credit score.
Why does your credit score matter?
All adult UK residents have a ‘credit file’ – a record of all borrowing and credit. This information is collected by three main credit reference agencies – Experian, Equifax, and TransUnion.
Each of these agencies then put together a ‘credit history’ – a snapshot of your credit file based on how you’ve managed any credit you’ve had. Credit providers can access this file to get a quick idea of how risky it is to lend to someone. The lower the risk, the more likely you are to be offered credit at a good rate – everything from mortgages and vehicle loans right through to phone contracts and overdrafts.
The thing is, not having credit often means your credit history look bare – and this reduces your score. With no track record of borrowing, lenders have no idea whether or not you’ll manage credit well or not.
Since this is the case, it’s often helpful to have official proof that you’ve managed financial arrangements well. This is where Rental Exchange can be helpful. Even if you haven’t been able to get credit elsewhere (maybe because you’ve got a low credit score or no fixed address) – Rental Exchange means you have a chance to improve your credit score, simply by making rental payments on time.
Are all credit reference agencies included in Rental Exchange?
Unfortunately, it’s just Experian that are factoring in people’s rental payment history as part of the Rental Exchange program at this time.
This means that your credit score might be different between different credit referencing agencies. However, Experian is the largest and the agency most used by lenders – so you’ll benefit from being part of the scheme with most lenders.
How do you know if you’re included in the Rental Exchange Scheme?
According to the latest figures, around 150 major landlords, housing companies, and social housing firms are signed up to the Rental Exchange program.
Experian don’t share information about which specific landlords are signed up to the scheme, so the best way to work out whether yours is included is to ask them. Usually a quick phone call or email will suffice.
If you are a tenant of an included landlord, then chances are you’re already part of the scheme. This is because there was an automatic ‘opt-in’ – which means all these landlords’ tenants were included when the scheme launched.
Of course, you can always check your Experian credit report too. If you’re included, your rental payment information from your existing tenancy agreement will show on your report.
Can I sign up to the scheme if I’m not already included through my landlord?
With hundreds of thousands of private landlords in the UK, it’s probably quite unlikely that yours will be signed up to the scheme. However, there’s no cost involved and it’s simple enough for a landlord to get involved in – so if you’d like them to be, there’s no harm in asking.
Don’t worry if they don’t or you don’t feel comfortable requesting that they do though – you can sign up individually.
Experian has partners that let you access the benefits of Rental Exchange. Companies like Credit Ladder and Canopy can be given access to the bank account that your rent comes out of – and they’ll report that information back to credit agencies to hopefully build your credit rating.
Access to these services is given through the Open Banking service – so you can be confident that it’s a safe and secure way to do things.
It’s understandable that you might not want a third-party app or company accessing all the information in your bank accounts – however, this is the only current way of accessing the scheme for a private tenant with a landlord that isn’t signed up.
Are there any downsides to Rental Exchange?
While Experian say that most tenants will benefit from their Rental Exchange program, it’s worth thinking about your history with tenancy agreements and rental payments to decide whether or not rental exchange is going to work for you.
If you’ve missed payments recently or left a tenancy owing money, this will be recorded as part of Rental Exchange. As such, you might decide that avoiding the scheme or opting-out would be a better bet for you if you’ve struggled in the past.
The current cost of living crisis is seeing more and more people running into problems with rent payments too – with people having to balance the cost of food and energy against keeping up with rent costs. If you anticipate having problems with rent in the near future, it might be better for you to avoid Rental Exchange to avoid damaging your credit score.
There’s no obligation to be part of the scheme, so it’s only worth being involved if it’s going to benefit you.
