Paying your rent punctually may soon enhance your eligibility for acquiring a credit card or mortgage, as reported by Experian. The credit reporting agency is revamping its credit scoring system to consider more positive financial behaviors exhibited in people’s daily lives.
In addition to rent payments, individuals will receive credit for minimizing overdraft usage, avoiding cash advances on credit cards, and consistently meeting phone contract payments. Tenants will need to actively choose to include their rental payments, as missed payments will have a detrimental impact on their credit score.
The upgraded scoring model will now range from 0 to 1,250, eliminating the categories of “poor” and “very poor” and the color red. Instead, the new classifications will be Excellent, Very Good, Good, Fair, and Low.
Following these alterations, over 40% of individuals are anticipated to move down a score band due to the expanded scoring range. Nevertheless, Experian assures that the changes will not affect one’s creditworthiness for loans, mortgages, or credit cards.
Experian will provide guidance and suggestions to assist individuals in enhancing their credit scores if they fall into a lower band. The new scoring system will be progressively implemented starting in November and will be fully rolled out to all customers by the year’s end.
It is essential to note that there is no universal credit scoring system in the UK. The three primary credit agencies – Experian, Equifax, and TransUnion – each utilize their own scoring methods, resulting in varying credit scores among the agencies. Lenders often consider a combination of credit scores and other financial information, such as income, when making decisions on financial products.
Edu Castro, Managing Director of Experian Consumer Services, UK & Ireland, remarked, “Our new Experian Credit Score aligns better with the evolving financial habits of individuals, offering a clearer insight into credit report information and personalized strategies for enhancing financial standing.”
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