CreditLadder Review: Can it Improve Your Credit Score?
The majority of us find ourselves relying on our credit rating to help us get things like a mortgage or a loan at some point during our adult lives.
But because credit scores only take into account certain financial behaviours, it can be difficult for young people – especially first-time buyers – to build up the credit history they need to take out a mortgage.
One factor that hasn’t traditionally been considered as a way to help increase your credit score is rent payments, but CreditLadder hope to change that!
What is CreditLadder?
CreditLadder is a credit reporting service that offers help to first-time buyers – who typically have a below-average credit rating – get a mortgage, by providing details of their rent payments directly to the UK’s leading credit reference agency (CRA), Experian.
They do so to demonstrate the financial reliability of the individual, in the hope that the CRA will see the regular rent payments as a form of credit and perhaps improve their Experian credit score in the long-run.
Young people are forking out hundreds of pounds each month to their landlords, in-full and on-time, so why shouldn’t they be rewarded for it in the form of a better credit rating?
How exactly does it work?
Signing up to CreditLadder is easily done via their website (or the Starling Bank app – which we’ll discuss in due course) with some simple details, including personal information such as your name, address and phone number, as well as information about the property, your landlord and the bank you use to make rent payments.
By signing up, you are basically giving CreditLadder permission to forward your rent payment details to Experian and other CRAs, should they partner up in the future. Your Experian credit report will then be updated with rent payment information each month.
You won’t be able to see this unless you sign up to Experian or a credit checking website that uses Experian’s data, but fear not, it will be there, and it’s likely to have a positive impact on your credit status.
Do I need permission from my landlord to use CreditLadder?
You don’t need to get permission from your landlord to use CreditLadder, but they will be contacted in order to verify that you are genuinely a tenant at their property.
It’s an important part of the application and must be completed before you can benefit from the service.
If your tenancy agreement is amended, cancelled or updated in any way, you are obliged to provide that information to CreditLadder. It’s easy to do and can be done using your online portal within a matter of minutes.
How does it improve my credit score?
There’s no guarantee, but CreditLadder provides Experian with evidence of you regularly paying rent and keeping up with your financial obligations, which it hopes will prove your reliability and ability to manage payments.
That should in turn build a solid credit history and a better credit score, which should then increase your likelihood of being accepted for a mortgage. As there’s limited evidence to prove this at the moment, this can only be described as the best case scenario.
The worst case scenario is that it doesn’t make much difference to your credit score, and that’s about it, meaning that there’s little-to-no risk to using the service.
CreditLadder’s primary aim is to increase its users’ chances of being accepted for a mortgage (and other types of credit) during these difficult economic times, which they could well succeed in - as long as lenders buy into the service.
What about other CRAs?
Not all credit lenders will take data from Experian, as many use just one or two of the CRAs, rather than all of them.
CreditLadder informs Experian of members’ rent payments, but it currently has no agreement with any of the other CRAs in the UK – Crediva, Equifax or TransUnion.
CreditLadder bosses claim that they are looking to partner up with these other CRAs in the near future and, with the backing of the widely used Experian, it seems that the likes of Equifax and TransUnion will want in sooner rather than later.
Does it matter which bank I’m with?
It does matter which bank you’re with, but CreditLadder accepts reports from the majority of large banks in the UK, including (but not limited to) the following:
*It’s worth noting that Starling Bank and CreditLadder just announced a partnership, which means that those who bank with Starling are able to have their rent information automatically sent to Experian by CreditLadder, if they wish.
You can even sign up to the CreditLadder service via the Starling Bank app, just to make things even easier.
Nationwide is the only lender who has officially stated that it is committed to using CreditLadder as a source of rent payment information when deciding the eligibility of mortgage applicants, but CreditLadder has stated that it has plans to expand their network of lenders as soon as possible.
It’s still a relatively new organisation, so there’s limited evidence to show that their idea actually works, but it certainly seems to be moving in a positive direction.
Is CreditLadder free?
CreditLadder provides your rent payment information to Experian completely free of charge.
There’s also the option to purchase a paid plan, called CreditLadder Plus, which costs £8.99 per month and provides users with benefits such as free mobile phone insurance, savings plans and discounts at over a hundred retailers.
CreditLadder claims that its Plus customers save £263 per year on average, so it could be worth considering if you’re the type that loves a bargain hunt!
But for those that just want their rent information to be provided to Experian, the free account will do just fine.
Does CreditLadder benefit landlords?
What CreditLadder has introduced could essentially act as an incentive for tenants to pay their rent on-time, so as landlords, you’ll never be waiting on rent again.
It’s also due to introduce two new services for landlords before the end of 2019, including access to and information regarding:
Comprehensive reference checks on tenants
SMS and e-mail alerts when payments are due
Although it’s still relatively early days for CreditLadder – having only been founded in 2016 – it has certainly made waves within the industry and could well change the way that first-time buyers are looked at by lenders.
Being able to improve their credit score by paying rent is without doubt a sign of better things to come for first-time buyers in the UK!