A good credit rating is hugely important when it comes to being considered for major loans such as mortgages. However, despite rent being the biggest outgoing each month for most tenants, it is not routinely added to their credit report as a sign that they pay back what they owe over the course of their tenancy.
That is precisely why we created our RentTracking product, powered by Open Banking, Experian and Plaid, to enable renters to get the credit they deserve for paying on time by adding rent to their credit history in a way that doesn’t happen for most at present.
Why should agents encourage rent tracking?
It’s a win-win for all parties in a rental transaction. For tenants, it’s a chance to improve their credit score and their eligibility for credit, which will be especially important if they have designs on owning a home in the future. Even if they don’t, a good credit rating is still something to aspire to for a host of other reasons.
For landlords, meanwhile, providing tenants with a further incentive to pay their rent on time each month – and to get rewarded for it – can only be a good thing.
For you as the letting agent, happy landlords and happy tenants is what you are aiming to achieve and will make the job of managing tenancies that much easier.
Rent can sometimes be viewed negatively as dead money, but that needn’t be the case if rental payments really count to improving your tenants’ financial record and their financial future. By boosting their credit history each month, with regular, reliable payments, they boost their chances of securing a mortgage when the time is right to own a home.
One of the first things lenders will be on the lookout for is a good or outstanding credit rating, so they know that the person they are lending to is likely to pay back their mortgage repayments or their car loan each month.
RentTracking makes that possible by making it clear what has been paid, when the next payment is due, and how many months rent has been tracked for. Previous tenancies can also be included to allow tenants to build up a record and history of rental payments from tenancy to tenancy.
If a tenant can show they have been paying their rent on time, without issues, for a number of months or even years, this augurs well for their chances of convincing a lender that they are a safe bet to lend to.
How does it work?
Here at Canopy, we help to improve the relationship between letting agents and tenants by providing our RentTracking product, allowing agents to give something back to their tenants and keeping them content and happy as a result.
The first step of the simple-to-use system involves the tenant connecting their bank account to Canopy via secure Open Banking and tagging their regular rental payments. So, if a tenant uses their Starling, Monzo, Halifax or NatWest bank account to pay their rent, this account would be added as a connected bank. More than one bank is allowed if a tenant uses more than one account to make up their rent, although the vast majority tend to use one main account to pay what they owe.
Once the account is connected, we will use the information to identify the tenant’s rent payments in future. Tenants pay their rent as usual and these transactions are tracked, allowing us to report their rent to Experian and Equifax – two of the UK’s main credit report agents - at no cost to the tenant or you as the agent. All of this can easily be tracked via the app.
The next step is for tenants to simply be rewarded for renting, something which doesn’t happen enough as renting is often seen as inferior to buying or owning a home. As their regular rental payments are finally taken into account, tenants can sit back and watch their credit report improve, meaning all those years of renting will finally start paying off.
Renting should never be seen as dead money – it should have meaning and relevance, and help a tenant build a strong and healthy financial history. Rent tracking allows that to happen.
Each month, the majority of tenants pay in and it seems only right that they should get something back. As an agent, it is to your advantage, too, to have tenants that are financially healthy and incentivised to regularly pay their rent each month. It will make your job far easier and ensure that your landlords are happy, too.
With the current crisis, financial health and security has become more important than ever, and people’s homes have taken on a whole new meaning. Allowing tenants to get rewarded from their rental experience, while also improving their chances of borrowing in the long-term, can only be a good thing.
In the first place, landlords and agents working on their behalf can also improve their chances of attracting and retaining credit-conscious tenants by using RentTracking. We know a better credit score translates into more financial opportunities for tenants, and less risk of rental arrears for landlords and letting agents. As we said at the start, it’s win-win all round.