Paying your rent punctually may soon enhance your likelihood of securing a credit card or mortgage, according to Experian. The credit reporting agency is revamping its credit scoring system to consider more positive financial behaviors demonstrated in daily life.
Apart from rent payments, individuals will earn credit for minimizing overdraft usage, avoiding credit card cash advances, and making regular phone contract payments. Tenants will need to opt in for their rent payments to be factored into their credit score, with missed payments having a detrimental impact.
The updated scoring system will now range from 0 to 1,250, eliminating the “poor” and “very poor” categories and the color red. Instead, the new bands will be labeled as Excellent, Very Good, Good, Fair, and Low.
Over 40% of individuals are expected to shift to a different score band due to the expanded scoring range. However, Experian assures that eligibility for credit products like mortgages, loans, and credit cards will not be affected by the changes.
Experian will provide guidance and tips to assist individuals in improving their credit scores if they fall into lower bands. The new scoring model will be gradually introduced starting in November and will be fully implemented for all customers by year-end.
It is important to note that there is no universal credit score in the UK, as three main agencies – Experian, Equifax, and TransUnion – each utilize their scoring systems. Lenders typically consider a mix of credit rating agencies and other financial information, such as income, when evaluating loan applications.
Edu Castro, Managing Director of Experian Consumer Services, UK & Ireland, highlighted that the updated Experian Credit Score reflects modern financial management practices and provides a clearer understanding of credit behavior, offering personalized insights for financial improvement and better borrowing opportunities.