Paying your rent punctually may soon enhance your eligibility for obtaining a credit card or mortgage, as per the latest updates from Experian. The credit reporting agency is revamping its credit scoring system to consider more positive financial behaviors exhibited in daily life.
In addition to rent payments, individuals will receive credit for minimizing overdraft usage, avoiding credit card cash advances, and making timely payments on phone contracts. Experian emphasizes that tenants must actively opt in to have their rental payments factored into their credit score, with missed payments adversely affecting their score.
The adjusted scoring model will now range from 0–1,250 instead of 0–999, eliminating the “poor” and “very poor” classifications and the color red. The new bands will now be labeled as Excellent, Very Good, Good, Fair, and Low.
It is projected that over 40% of individuals will move down a score band following the expanded scoring range, with 42% likely to move up a band and 14% maintaining their current band. However, Experian assures that these changes will not impact credit eligibility for products like mortgages, loans, or credit cards.
Experian plans to provide guidance and recommendations to assist individuals in raising their credit score if they fall into a lower band. The updated scoring system is set to be implemented starting in November and will be accessible to all customers by year-end. It is crucial to note that there is no universal credit scoring system in the UK, with Experian, Equifax, and TransUnion each utilizing their unique scoring models.
Different credit scores are anticipated across these agencies, and lenders typically combine credit ratings from multiple agencies along with other financial details, such as income, to evaluate creditworthiness. Edu Castro, Managing Director of Experian Consumer Services, UK & Ireland, emphasized the evolution of financial management practices and how the new Experian Credit Score reflects these changes, offering a more personalized view to help individuals make informed financial decisions and unlock better borrowing opportunities.
