Paying your rent punctually may soon enhance your likelihood of acquiring a credit card or mortgage, as Experian is revamping its credit scoring system to encompass more positive financial behaviors observed in daily life.
Apart from rent payments, commendable actions such as reducing overdraft usage, steering clear of credit card cash advances, and making consistent phone contract payments will also be factored into the new model.
Tenants will need to actively opt-in for their rental payments to be considered, and any missed payments will adversely impact their credit score.
The updated scoring range will shift from 0–999 to 0–1,250, 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 following the changes, with some moving up, some down, and others remaining stable. Nonetheless, eligibility for credit products like mortgages, loans, and credit cards will remain unaffected by the alterations.
Experian will offer guidance to assist individuals in enhancing their credit score if they find themselves in a lower band. The updated score will be gradually introduced starting in November and will be fully implemented for all customers by year-end.
It is crucial to note that the UK does not have a universal credit score. The country utilizes three main agencies – Experian, Equifax, and TransUnion – each with its unique scoring system, leading to varied credit scores across these firms. Lenders typically consider multiple credit rating agencies and additional financial details, such as income, when evaluating loan applications.
Edu Castro, Experian Consumer Services Managing Director for the UK & Ireland, emphasized the evolution of financial management practices and how the updated Experian Credit Score now better reflects crucial everyday financial habits, providing individuals with a clearer picture of their creditworthiness and actionable steps to boost their score, thereby enabling improved borrowing opportunities in the future.