CreditLadder: What is it and how can it boost your credit rating?
What is CreditLadder?
The average UK credit score for new buyers makes it difficult to get on the first rung – let alone to the top – of the property ladder.
CreditLadder is a service which aims to help those who pay regular rent payments improve their Experian credit score, in the hope that it will be easier for them to gain acceptance for a mortgage in the future.
Founded in 2016, they are believed to be the first company within the UK to offer this service and have already helped thousands across the country to improve their credit score.
Does rent count towards my credit score?
One of the common questions asked when renting a house is: can paying rent increase my credit score?
Experian, Equifax and TransUnion – the UK’s top three credit reporting agencies – will all take your rent payments into consideration when calculating your credit score, but only if they receive the relevant information. This is where CreditLadder comes into play.
How does CreditLadder work?
When signing up to CreditLadder, you are giving them permission to forward details on your rent payments to the Experian Rental Exchange Initiative, which stores the information on your credit file.
To sign up to CreditLadder, you can visit their website and enter all relevant details. These include details about:
- Your bank account from which your rent is taken
- Your property
- You landlord
You do not need to seek permission from your landlord in order to sign up to CreditLadder. However, they will be asked to verify the details you have given before your application can be accepted.
If there are any changes made to your tenancy agreement – such as your address, or the amount of rent that you pay – you must provide CreditLadder with up-to-date information by signing into your CreditLadder account online.
By providing Experian with proof of regular on-time payments, CreditLadder hope to give people with thin credit files a greater chance of being accepted for credit cards and loans, as well as mortgage applications.
There are a wide range of credit reference agencies in the UK other than Experian – such as Equifax, TransUnion and Crediva – and CreditLadder are aiming to partner with more of these agencies in the near future.
CreditLadder accepts reports from the following banks:
- Co-operative Bank
- First Direct
- Lloyds Bank
- Metro Bank
Note: If you bank with Starling, they will send this information automatically as part of their ongoing partnership with CreditLadder.
Is CreditLadder free?
CreditLadder’s core service is free of charge. This allows your rent to be reported to Experian, in the hope of being awarded with a better credit score.
CreditLadder also offer a paid plan, offering a range of benefits such as free mobile phone insurance, saving plans and discounts at retailers across the country.
CreditLadder state that customers who hold a CreditLadder Plus account save an average of £263 a year, with plans starting from just £8.99 a month.
Will CreditLadder increase my chances of getting a mortgage?
That’s certainly the plan – but it isn’t guaranteed.
Nationwide are the only lender who have announced that they actively utilise the data provided by CreditLadder when considering mortgage applications, although they do plan on expanding their network of lenders in the upcoming future.
There is currently limited evidence that other mortgage providers have begun to use rental payments as part of their risk assessments during the application process, but a spokesperson for CreditLadder told Which? that “a number of lenders we have spoken to are keen to understand how historical rent payments can be built into lending decisions.”
CreditLadder for landlords
CreditLadder helps landlords by incentivising tenants’ on-time payments.
They are due to bring out 2 additional services for landlords later this year, which will include access to rent guarantee insurance, comprehensive reference checks on tenants, and SMS and email alerts when payment is due among other benefits.
What is a good credit score in the UK?
It’s hard to say what a ‘good’ credit score is, as they are calculated differently depending on your chosen agency. For a more detailed look at credit scores, what they mean and how they are calculated, visit Bobatoo's complete guide to credit scores in the UK here.
And if you’re concerned about your credit rating, or are struggling to gain acceptance for a mortgage, loan or credit card, why not take a look at Bobatoo's guide to improving your credit score?