Major news for landlords – rent payments can now be included as part of tenant’s credit score.
Credit scores are designed to show lenders how likely you are to repay money. By including rent payments in the same way that mortgage payments appear on credit scores, financial transparency between landlords and tenants could change.
What does this mean for landlords?
Tenants who pay their rent on time will now see their credit score improve, while those who miss payments will likely see their credit score negatively affected, similar to missing a credit card or loan payment.
This introduction of this new scheme could be advantageous for landlords. This change may encourage tenants to prioritise rent payments and avoid accruing arrears, particularly if they intend to consider purchasing a property or applying for credit in the future.
The incentive that regular and timely payments will boost credit scores for renters has the potential to positively influence a landlord and tenant relationship.
We will have to see how the changes are adopted, but one possibility is that landlords may consider the grant of a tenancy dependent on whether the prospective tenant is a participant of the scheme.
What should landlords do next?
It should be noted that renters are required to opt into their rent payments forming part of their credit score. In some instances, credit checks are already completed on perspective tenants, so the change may result in this being used more widely, or a landlord may require evidence of a tenant’s credit score that is opted into the scheme before granting a tenancy.
This ought to give landlords the ability to narrow down prospective tenants to those who are willing to opt into rent being paid as part of initial checks and future credit control, in a bid to reduce the risk of a tenant falling behind with payment of their rent.
For landlords, this scheme could improve rent collection rates, increase financial transparency between landlords and tenants, and change the way that tenants are vetted in the letting process. Contact our specialist solicitors today on 0161 696 6170 or fill in our enquiry form.
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