Reeves urged to fix Britain’s ‘broken credit system’ that’s failing millions of renters
A coalition of MPs, lenders, fintechs and charities have urged Rachel Reeves to fix the UK’s “broken credit system”, warning that millions of renters are being locked out of home ownership.
The Financial Freedom for Everyone campaign, which includes The Money Charity and Clear Score, sent an open letter to Chancellor Rachel Reeves’, calling on the government to lead a coordinated approach that ensures rental payment data is consistently and securely shared with credit reference agencies.
The group warned that the system unfairly penalises renters, holding them back from accessing financial opportunities, including home ownership, due to rent not being automatically recognised as a credit score component in the UK.
The letter said: “Ensuring there is great provision of rental payment for use in credit assessments would not only improve financial inclusion but also empower millions of renters to build their credit profiles, access better financial products and achieve greater economic stability.”
The call comes as the government bids to build 1.5m homes during its term and prepares to publish the first National Financial Inclusion Strategy.
Surges in financial exclusion
Rent payments being excluded from credit files, except in circumstances where a landlord may opt to include them, while mortgage payments routinely contribute to them, has also led to a surge in financial exclusion.
In the UK, 20.2m adults are financially underserved, a 50 per cent jump from 2016.
Meanwhile one in three have found themselves unable to access mainstream credit, leaving them to increasingly rely on illegal lenders over the last three years.
John Gillespie, chief executive of lender Evlo, said: “Every day we meet people who’ve never missed a rent payment but are locked out of affordable credit.
“It’s a clear injustice that needs to be fixed.”
Sam Carling, MP for North West Cambridgeshire, added that reforming the system would be “simple common-sense change that would make a real difference”, in particular in helping first time buyers take their “first step onto the property ladder”.
Credit files and incentives
The group’s call to reform the system includes allowing renters the right to opt-in to have their rental payments added to their credit files.
The group also called for further support for both landlords and letting agents, such as clear guidance and incentives to participate in rental data reporting schemes.
Shiona Crichton, chief executive and director of lender Moneyline, said: “The number of rental in the UK is growing, and we need rental payments to be reported to and included in credit reporting to bring financial equality between homeowners and renters.”