How it works: the new Rental Exchange Initiative

We’ve covered the all-important ‘what’, ‘how’ and ‘why’ of the Rental Exchange Initiative. If you’re not already sold, we think you might be soon!

If someone has a mortgage and sticks to their repayments every month, their credit score will benefit from it. But, before the Rental Exchange Initiative, tenants who stuck to their rent each month wouldn’t reap the same rewards. Hardly seem fair, right?

If you’re not entirely sure what the Rental Exchange Initiative is just yet, don’t worry, because we’ll be covering what it is, how it works, and its key benefits next.

What is the Rental Exchange Initiative?

The Rental Exchange Initiative was born from a partnership between Experian (one of the main credit reference agencies) and Big Issue Invest (the social investment branch of The Big Issue Group).

They noticed a flaw in the way renters were being treated. They didn’t think it was fair that punctual rent repayments weren’t recognised. They saw the financial exclusion it caused millions of UK consumers. And so they did something about it.

While the scheme helps tenants, social housing providers, credit providers, private landlords and letting agents, for the purpose of this article, we’ll be focusing primarily on the first; tenants.

Anyway, we’ve digressed from the actual question. In its simplest form, the Rental Exchange Initiative includes a tenant’s rent payments on their credit report, to ensure they’re eligible for the same credit-boosting benefits as homeowners.

The best bit? It doesn’t cost the tenant or housing provider a single penny.

How does it work?

It’s pretty simple really. Whether you’re renting from a social housing provider, private landlord or managing agent, they’ll supply the Rental Exchange Initiative with accurate and up-to-date information on your payment habits.

If you’ve a track record of paying your rent on time and in full each month, it’ll work in your favour. Why?

Well, because the information that’s sent over to the Rental Exchange Initiative will be pulled up by credit providers each time you make an application for any type or credit - like a loan, mortgage, or credit card.

If you’ve paid your rent consistently, in full and on time, it’ll mean you’re more likely to be accepted for credit.

It’s worth noting, however, this information will only be seen if the credit provider makes their credit or identity check using Experian’s database. If they’re using one of the other credit reference agencies, they won’t have access to your rent repayment data.

How can I make sure my rent is being logged?

The whole point of the Rental Exchange Initiative is that credit providers can see you’re reliable with payments, so, naturally, you’ll want to make sure it’s doing just that.

To ensure your rent payments are being reported you’ve got three options:

1. If you’re renting off the council or social housing ask your landlord to report your rental data to the Rental Exchange Initiative.

2. If you’re renting off a landlord or managing agent (i.e. you’re a private tenant) and they have more than 500 properties under their belt, ask them to report your rental data to the Rental Exchange Initiative.

3. Your third and final option is to report your data yourself through the Initiative’s partners: CreditLadder or Canopy.

How it helps

Credit score

We’ve touched on it a few times throughout the article, but, because the Rental Exchange Initiative includes your rent repayments on your credit file, it can help improve your credit score.

But, and this is a big but, only if you regularly stick to your rent repayments - and in full. This will make you look reliable and responsible with money, which is all lenders want to see when deciding whether or not to grant you a credit card, loan or mortgage.

More competitive deals

A better credit score will open you up to better deals. It’s as simple as that. So, not only will your odds of being accepted shoot right up, but the interest rate attached to the deals you are offered will be more attractive too, making it cheaper to borrow.

No additional credit required

Previously, if you were a tenant and you wanted to improve your credit score, you might have had to take out an additional line of credit to do so (if you didn’t already have one available to you, that is). Well, the Rental Exchange Initiative opens you up to all the same credit-boosting benefits, without the burden of debt hanging over you.

The easy life

The more information you have on your credit report, the more accurate of a picture lenders can paint. So, adding your rental data to your report could make it quicker and easier for you to:

-     Open a new bank account

-     Get a new credit card

-     Have a loan application approved

-     Arrange a better utility rate

-     Access a better mobile phone contract

-     Apply for a mortgage.