Covid-19 and your credit rating

Written by
Tahir Farooqui
CEO
Renters
May 13, 2020

Are renters entitled to withhold rent?

The official Government guidance states that ‘tenants are still liable for their rent and should pay this as usual’ during Covid-19. If a tenant does not pay their rent, the landlord is within their rights to apply for a ‘money order’ to recover lost funds. If granted, the order can lead to a County Court Judgement (CCJ) or a High Court Judgement (HCJ) issued against the tenant. This can go on to damage a renter’s credit score as the CCJ or HCJ will be picked up by the UK’s reference agencies and added to their credit file. If you can’t pay your rent due to financial difficulties, you can read about what to do in our blog here.

But my landlords isn’t paying their mortgage

Many renters have heard about mortgage repayment holidays and may assume that all landlords have stopped paying their buy-to-let mortgage, giving them license to stop paying their rent. This isn’t true. Mortgage payment holidays are only available for landlords who are struggling to make their buy-to-let mortgage payments because their tenants are unable to pay part or all of their rent as a direct result of Covid-19. In many cases, a tenant will need to provide a landlord of evidence of related financial hardship, such as a recent Universal Credit application. A landlord may choose not to take a mortgage holiday as the holiday months are not cost-free – they are simply added on to the end of the mortgage term.


Can rental payments help my credit score?

Renters can improve their credit score during Covid-19 when they rent using Canopy – which is part of the Rental Exchange Scheme with credit agencies. We use Open Banking to track whether you have paid your rent on-time each month and then use this data to improve your credit score through our partnership with Experian. It’s an easy way to be rewarded for paying your rent. Please remember, renters using Canopy who don’t pay their rent may negatively impact their credit score.

If I prioritise my rent, can I get help with other bills?

The good news is the UK’s three credit reference agencies - Experian, Equifax and TransUnion – have agreed an ‘emergency payment freeze’, which is designed to help people protect their credit scores during the Covid-19 crisis. While this measure primarily pertains to those with mortgages, it also covers other forms of credit made available by lenders. 

Renters who are struggling to pay back debts – such as credit card bills or car loans – should speak to their lender as soon as possible to request a possible payment holiday, reduced payment scheme, paused payment schedule or increased credit limit – all of which will have a minimal impact on the borrower’s credit score. Any payment freeze will not show up on your credit report and you pre-crisis credit score will remain unchanged. It’s worth noting that a payment freeze may affect your ability to get credit in the future, so it’s worth discussing the implications with each lender.

If you’d like to know how to improve your credit score with Canopy, get in touch today.


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