The hidden benefit to paying rent
"It's just a waste of money," "You're paying a fortune for something which isn't yours," "You're just paying someone else's mortgage for them." "A homeowner gets credit more easily." If you pay rent to a private landlord you've probably heard this, and more besides, from your property owning friends and family.
Yet, there are plenty of good reasons why paying rent is the best option for many of us. You don't want to be burdened by a 25 years or even longer loan around your neck. You enjoy the freedom of being able to move house whenever you like without having to go through the torture and expense of selling a home. You move around the country with your job or you like the idea of just taking off whenever you want without having to worry about mortgage payments while you are away. Certainly our peers on the continent don't view home ownership in the same zealous manner we do in the UK.
But did you know there is now another positive to renting? Every time you make your monthly rent payment you could be building your credit score. You thought that was the case anyway? Sadly, no.
There has long being a financial anomaly in which mortgage payments are registered by credit reference agencies such as Experian meaning homeowners find it much easier to get credit including loans, credit cards, store cards etc. Yet rent payments are not reported to the credit reference agencies so even though you may be the perfect tenant never missing a payment this was never recorded. Your credit score never benefited. Fortunately, this no longer has to be the case.
Credit where credit is due
The befits of having your rent payments increase your credit score are many. Over time, as your credit score increases, you may become eligible for better lines of credit. The fact that your payments are recorded in your credit report also helps companies check your identity online, make sure you are who you say you are and check you are living at a bona fide address.
In turn this can make it much easier for you to:
Open a current account at a high street bank
Apply for and obtain a new credit card
Apply for and be accepted for a loan
Move to a cheaper tariff for gas and electricity
Get better deals on mobile phones
OK, sounds great. Now what do I do?
Simply head over to Credit Ladder and sign up. It doesn't cost anything and it's a quick and easy process. It makes complete sense and there really is no catch. There are no fees or charges and, over time, your rent payments can help increase your credit score.
Oh yes. Those incredulous statements we opened the article with? They are usually spoken by someone shackled by a massive mortgage which leaves them with no disposable income and just the promise of positive equity to see them into retirement.
CreditLadder can help you improve your credit score
If you want to improve your credit position by reporting your rent payments, CreditLadder is the only way to improve your credit score and position across all four of the main Credit Reference Agencies in the UK, namely Experian, Equifax, TransUnion and Crediva. Building up a high credit score has a lot of benefits, including helping you access finance at better rates - this can also help save you money.
CreditLadder also runs a free mortgage application service in partnership with Tembo which will tell you how much you could borrow.
Remember the information provided in this article is for information purposes only and should not be considered as advice.
