New rental data to be made available to credit providers

By Mark Goodfellow, Head of Data for Rental Exchange, Experian

The UK’s rental market is booming. Our data shows that properties for let are growing at a faster rate than homes for sale. Indeed, the level of residential stock for sale just fell to its lowest point in two years. 

There is growing demand for rental properties across much of the UK. Figures from the English Housing Survey published last year show that almost seven million people rent their homes in the UK today.

Younger adults are most impacted. The number of homes in England and Wales owned by people under 35 fell from 2.2 million to 1.4 million between 2001 and 2011 according to the Financial Times. The number of under-35s in private rented housing rose from 1.1 million to 1.9 million during that time.

Rising numbers of buy-to-let owners and increased activity from international real estate investors have helped meet this societal shift in demand.

We can’t say whether this is a short term trend, or the early stages of a move to a more European model of home ownership. We do know, however, that people who have historically chosen to rent rather than buy have not seen their biggest regular expenditure recognised on their credit reports.

With little or no credit history, millions of social housing tenants have been excluded from mainstream financial services and affordable credit, or paid a premium for access.

The Rental Exchange, which we have developed in partnership with Big Issue Invest, provides a route for rental payments to be incorporated into credit report and is an important development in this regard.

By treating rental and mortgage payments the same we can provide greater access to mainstream finance. Shared rental information opens up a world of financial services to tenants whose lack of track record means they cannot easily access bank accounts, mobile phone contracts and utility services.

As banks, building societies and other credit providers need to lend responsibly and prevent fraud, they need the most complete view of customers’ financial commitments and payment history they can get.

The view from our Rental Exchange is overwhelmingly positive. It provides evidence that most people are responsible consumers, even if they’ve been off the credit radar.

Our analysis shows it would give 93 per cent of social housing tenants a credit ratings boost, allowing access to cheaper and more convenient financial services for the first time.

When available to lenders it will also provide a significant boost to responsible lending capability. With a truer picture of existing commitments creditors can better understand levels of indebtedness and affordability, and gain a new insight into potential customers they had little or no information about before.

Where people are suffering financial stress, lenders and landlords will be better informed to engage appropriately and sensitively. Armed with the facts they can put arrangements in place, arrange support and take steps to help avoid a debt spiral if required.

Using manual processes, two documents providing proof of identity are required to authenticate a customer. With the addition of rental payment information, providers will be able to validate the identities of a far greater number of people immediately and be better informed to provide the most suitable services.

We consulted widely as we developed the Rental Exchange. The Information Commissioner’s Office recognises that the use of rental data can provide significant benefits to low income households.

We are working with over 160 social housing providers (representing 1.9 million tenants) to start populating the Rental Exchange.  A number of social landlords have already reached the stage of communicating their intentions to residents.

Our CreditExpert service is also being adapted so that consumers can see the impact of rental data on their credit report and score online immediately (a key consideration in using this new data compliantly).

For more information on the Rental Exchange, or to discuss further with an Experian representative, please contact us today or visit our dedicated site.