Why does my £10 phone contract do more for my credit file than my rent? How including rent payments in credit files would improve credit access for young people
If a young person does not have a robust credit file, getting onto the housing ladder is almost impossible, writes Sam Carling MP
Before I begin, I should declare an interest. I live in one of the 5.5 million privately rented properties in the UK. In my early 20s, that puts me in the same boat as most of my peers, and a significant one-in-five of my constituents in North West Cambridgeshire.
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For most of us, monthly rent is our biggest outgoing. It is a non-negotiable sum we prioritise above almost everything else. Yet, in the eyes of mortgage lenders, years of disciplined, on-time payments often count for absolutely nothing because they’re not factored into the UK credit system. So, many young people looking to buy a home are stuck, unable to access the mortgage they need despite in some cases paying more in rent than their mortgage would cost them each month.
The credit system must actually reward good habits. Right now, a glaring ‘data gap’ leaves millions of diligent renters ‘credit invisible’, however responsibly they manage their outgoings. We are teaching young people to be smart with their money, but the system is not smart enough to reward them for paying rent on time.
Affordability is a huge issue for private renters. As a nation, we spend more on rent as a proportion of our income than most of Europe. World Health Organisation guidelines state housing is unaffordable if it consumes over 30% of income. The average UK renter pays more than that.
I am proud to have served on the Renters Rights Bill Committee. The reforms passed by this Government will make private renters more secure by ending no-fault evictions, improving tenants’ powers to challenge unfair rent increases, and more. But security is only half the battle; we also need financial recognition.
Many of my constituents are working hard to save for a first home. But they find their rent isn’t recognised when applying for mortgages. Despite spending a huge proportion of their income on housing, a £10 mobile phone contract often counts for more in the eyes of lenders than years of timely rent.
In 2023, the number of credit-invisible UK adults rose to 5.6 million, with PwC analysis showing that one in three adults in the UK struggle to access mainstream credit - largely due to poor or just thin credit files. That is a huge financial inclusion problem. If a young person does not have a robust credit file, getting onto the housing ladder is almost impossible.
How can we ensure a renter's payment history is factored into their credit files? We must require landlords to offer tenants the choice to share their rent payment data with credit reference agencies.
I am advocating for this alongside charities and industry groups through the Financial Freedom for Everyone campaign, which aims to help millions of people improve their financial future. Major credit reference agencies will record rental data if they have it, but too many private landlords are not offering this option, creating a barrier for renters facing financial exclusion.
There is no need to reinvent the wheel. Canada has already urged landlords and banks to include rental reporting in credit files, while California requires larger landlords to offer data-sharing to tenants. Closer to home, the Big Issue Foundation and Experian pioneered the Rental Exchange which already offers 1.5 million social housing tenants the opportunity to prove their financial responsibility through their housing provider reporting their rental data to credit reference agencies.
The problem is this option rarely reaches the private sector. But why shouldn’t it? We could introduce a duty requiring lettings agents and large landlords to do this. There’s no cost involved, after all. And for small landlords, we could still make a difference by including information in the mandatory pack given to new tenants on how they can report their own rent payments to the credit agencies.
This is a simple, common-sense change that would make a real difference - helping people demonstrate their financial responsibility and, in many cases, take their first step onto the property ladder.
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Sam Carling is the UK’s youngest MP and a leading advocate for the Financial Freedom for Everyone campaign, which seeks greater access to financial inclusion.
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