Research carried out in 2009/10, found that millions of low-income people are excluded from affordable credit, simply because they don’t have a credit history. On the back of this research, Big Issue Invest, the social investment arm of The Big Issue, and Experian, the UK’s leading Credit Reference Agency, partnered to launch the Rental Exchange. This initiative prevents low income people being caught in the vicious cycle of no credit score no lending, by accepting regular payment of rent as evidence of good credit history (in the same way as mortgage payments are).
The Rental Exchange, launched in 2010, works with registered social housing providers, to incorporate tenants rent payment history into their credit file, with no cost to the tenant or the housing provider. The fear that it might further worsen already poor credit scores for those who struggle with rental payments is not the case for the majority of social tenants, and Big Issue Invest and Experian, report that just 1%* of tenants they work with have decided to opt out of the scheme. By contrast, they say that ‘in over 70%* of cases, tenants with no significant arrears see a positive increase in their credit score’. A further 20%* who are on full housing benefit would see a neutral impact on their score.
As well as financial services, a less well-known fact is the impact not having a credit score can have on accessing goods and services, especially online. Credit history is often used to confirm an individual’s identity and is often the only formally established ‘digital footprint’ they have. A report produced five years on from the launch of the Rental Exchange, shows tenants involved have benefitted with an increase of online identity authentication rates from 39%* to 84%*.
All of the information/ data is held by Experian and can only be made available to a company/ organisation if the tenancy information is relevant and the tenant has agreed to a credit check. Social housing providers are able to access credit performance data to enable them to gain a better understanding of tenants’ financial situation, so that they can identify and support vulnerable individuals and families under financial stress. This information is potentially game-changing for landlords, especially where there are concerns around tenants being able to stay on top of rent payments, even more so with the roll out of Universal Credit. Small wonder then that over 150 landlords, ALMOS and local authorities have engaged with the Rental Exchange. This represents 1.5 million tenants across the UK.
Although it is recognised that a cultural shift may be required for organisations to learn how to utilise the data fully, the implications of being able to identify tenants who may need additional help are further reaching than just for landlords. One utility company has identified how it could better help customers manage their money through using the data. One telecoms company has reported being able to better authenticate the ID of new customers and, importantly, banks and lenders have said they will be able to offer better finance packages to tenants seeking credit.
For Big Issue Invest, The Rental Exchange offers a new opportunity to give people on lower incomes a ‘hand up, not a hand out’, the over-riding Big Issue philosophy. They are calling on lenders to access the data to provide a better deal to social tenants.
Source* Big Issue Invest Whitepaper 2015
For further information: http://www.experian.co.uk/rental-exchange/