In a Nutshell: Having a credit history and good score is extremely important when it comes to gaining approval for mortgages, financing vehicles, or getting a new credit card. CreditLadder helps consumers looking to establish or rebuild their credit by reporting on-time rent payments to Experian and Equifax — two of the U.K.’s three largest credit bureaus. Tenants can quickly and easily sign up for the service to begin working toward improving their score. The company’s service is also valuable for landlords. Advertising rent reporting can give listings a competitive edge. And CreditLadder customers tend to be more credit conscious and are more likely to pay their rent on time each month than the average renter.
Establishing and maintaining a good credit score is nearly essential in many Western countries today. Without a good-to-great credit score, consumers can face major barriers when it comes to things like securing loans, financing automobiles, and qualifying for credit cards.
Of course, some things are beyond our control. A medical emergency or some other large, unexpected expense can set people back years on their financial journey. And it’s possible to regain firm financial footing, but it may take some hard work.
Depending on their personal circumstances, individuals have a number of approaches they can take to establish or rebuild their credit.
In the U.K., consumers can leverage their monthly, on-time rent payments to help build good credit with CreditLadder.
The company works with renters to ensure their on-time rent payments are reported to credit bureaus, and, in turn, raise their credit score.
“It’s one of those things where we are often having a conversation with somebody and they suddenly stop and say, ‘Hang on, is this not happening already? And why is it not happening?’” said CreditLadder CEO Sheraz Dar. “They’ll say they’ve been renting for five or 10 years and are surprised to learn that none of that has gone on their credit file. But we’re here to help with that.”
CreditLadder works with both Experian and Equifax to report rent payments on behalf of consumers.
We spoke with Dar to learn more about the company’s background and how it can benefit both tenants and landlords.
Pioneering a New Way to Report On-Time Payments to Credit Bureaus in the U.K.
Dar said that when CreditLadder launched in 2016, one of the major questions the company set out to understand was why rent wasn’t being reported to credit bureaus, and if it could find a convenient solution to this perceived oversight.
“Experian was doing similar stuff in the U.S. at the time — they had something called the Experian Rental Exchange,” Dar explained. “And the conversation here in the U.K. was, our team has a lot of experience in finance and property. And the general view was, ‘This service doesn’t exist and why doesn’t it exist?’”
Dar said CreditLadder approached Experian to see if it would be interested in working with the company to bring a similar service to the U.K.
“So, it started with Experian doing what they called the Experian Rental Exchange, and we were the first business to offer that in the U.K.,” he said. “We now do everything through open banking, but in the beginning — when open banking wasn’t a thing — we used to collect rent from the tenant and forward that rent payment to the landlord or the agent.”
At the end of each month, CreditLadder would share the rent payment information with Experian.
Dar understood from the beginning that this early business model wouldn’t be viable for the long term because he didn’t want CreditLadder to be a business that actually handled money.
“There’s lots of legislation tied up with handling money, and it’s expensive,” he said. “It’s also a barrier to adoption because the tenant is not paying their rent directly, they’re paying it via a third party. But we did it at the time because we wanted to be first and gain a better understanding of how to manage the logistics of delivering this opportunity to the U.K.”
Dar said that, over the past two years, CreditLadder has been able to completely remove itself as the third party. So it no longer collects money, and it operates on a pure open banking API, he explained.
How CreditLadder Works and How Tenants Can Benefit from the Platform
“Historically rent payments have never been reported to credit agencies,” according to CreditLadder. “By using CreditLadder, your rent payments can now strengthen your credit history and improve your credit score. This is great news.”
Dar said that signing up for the service is simple, and, of course, comes with great benefits to consumers looking to build their credit. Users can sign up online by answering a few questions and connecting their bank account to CreditLadder.
“CreditLadder is FCA regulated and the Open Banking technology we use is supported by all major banks. Connect to your bank with confidence, thanks to high-level data encryption,” according to the company. “You can improve your credit position and the likelihood of accessing more affordable credit e.g. better rates on loans and credit cards, and mortgages.”
And serving the consumer is the company’s top priority, Dar said.
“Ultimately, our relationship is with the tenant,” he said. “So whether you come to us directly, or whether you come through a landlord, or a housing association, or letting agency, in the end, our relationship is with the consumer because it’s the consumer that connects their bank account to our platform and gives us the permission to read the rent payment.”
The U.K. has three main credit agencies — Experian, Equifax, and TransUnion. CreditLadder will report to the two largest agencies of the three, Experian and Equifax. The company hopes to add TransUnion to the list in the near future, according to the website.
All CreditLadder users can obtain the free plan in which the company will report on-time rent payments to either Experian or Equifax. The company will report to both bureaus for a small fee. The CreditLadder annual plan is £60, which equals £5 per month. And its monthly plan is £8 per month, with no long-term commitment.
Landlords Also Gain a Number of Advantages
While tenants can use CreditLadder to help boost their credit, landlords can also gain a number of benefits when their tenants use the service.
Tenants who use CreditLadder are 20 times more likely to pay their rent on time each month, according to the company.
And advertising rent reporting to potential tenants can give listings a competitive edge. In general, CreditLadder will attract and retain credit-conscious tenants who don’t miss rent payments.
“Rent arrears in the U.K. are on average 10%. Tenants using CreditLadder Rent Reporter have arrears of 0.5%,” according to the CreditLadder website.
The company’s Rent Reporter service also saves landlords and agency staff time and energy.
“CreditLadder Rent Reporter works by reading rent payments direct from their bank using open banking technology,” according to the company. “We support all major banks and don’t handle your money so there is no risk to your payments.”
The service helps rental companies realize their full potential for tenants.
“Integrating CreditLadder Rent Reporter into your adverts and branch communications gives your potential tenants another reason to sign with you,” according to the website. “By giving tenants the right tools to build a credit history, you’ll stand out from the crowd.”
Dar said he looks forward to CreditLadder leveraging its technology to provide even more valuable services in the future.
“We’re using open banking technology and our tech stack on top of that to do open banking referencing. So, that’s any reference that takes place ahead of a tenant moving in,” he said. “Ultimately I want every single tenant to benefit from rent reporting — that’s our ultimate goal.”