Pimp your credit score

A petition calling for rent payments to be used as evidence that people are able to meet mortgage payments has attracted 147,307 signatures and was debated in parliament in October 2017. The petitioner, Jamie Jack Pogson, said:

“Since living on my own, I have paid £70,000 plus in rent on time yet still struggle to get a mortgage. Unless you’re getting handouts, wealthy or in receipt of inheritance it’s almost impossible. I want paying rent on time to be recognised as evidence that mortgage repayments can be met.”

In its response, the government said: “Lenders must consider a range of factors when assessing a mortgage application. Meeting rental payments is not sufficient in itself to demonstrate affordability over the lifetime of the loan.

“Decisions around the availability of individual mortgage loans remain commercial decisions for lenders, and the government does not seek to intervene in these. Whilst one lender may be unable to offer a mortgage, being denied a mortgage from one provider does not preclude a customer from being offered credit elsewhere.”

How are mortgages currently assessed?

Mortgage payments may often be cheaper than rent, but what must also be considered are the additional financial responsibilities associated with home ownership. These may include property maintenance and insurance costs – as well as the long-term commitment of a mortgage.

The current regulations on mortgage lending put in place by the Financial Conduct Authority in April 2014 were designed to protect borrowers. They require lenders to assess affordability, including an analysis of income and expenditure, and obtain evidence of income. Lifestyle spending is also taken into account, such as how much is spent on clothes and eating out, as well as a borrower’s ability to meet repayments in the event of an interest rate rise.

Appointing an independent Chartered Surveyor to assess the building or structural issues with a house will ensure that purchasers are aware of any potential problems and associated costs.

A good payment history will positively reflect on the personal credit rating many lenders use when considering mortgage applications. The Credit Reference Agencies look at customer behaviour, including debt payments, so a history of responsible financial management should improve your chances of obtaining a mortgage.

Does anyone take rent payments into account?

Not all Credit Reference Agencies currently look at rent payments when assessing borrowers, and rent paid direct to a private landlord may not be reflected in your credit history. However, tenants can pay rent via Experian’s third party Rental Exchange Scheme, Credit Ladder, which was introduced in March 2016. The free service forwards the payment to the landlord and Experian records it against the tenant’s credit score.

Economic Secretary to the Treasury, Stephen Barclay, supported the petition, calling for more models like Experian’s. In the debate he said: “The government agrees that a history of paying rent on time is a factor that lenders can consider when assessing creditworthiness but it is a factor, alongside other factors, that they should take on board.”

Petitions cannot change the law and there is no parliamentary vote by MPs on whether to action a petition.

Check where you could afford to purchase on the BBC’s: Where can I afford to rent or buy?