Big Issue founder Lord Bird’s campaign to help tenants add their rental payments to their credit scores and give them access to more affordable loans and mortgages has taken a further step forward.

His Creditworthiness Assessment Bill, after passing through the Lords, sailed through its first reading in the Commons and will now go on to further scrutiny before becoming law later this year.

If it does pass successfully through the House of Commons, the bill will require financial watchdog the FCA to compel lenders to take both rental and council tax payment histories into account when working out whether to lend someone money, particularly mortgages.

This, Lord Bird believes, will remove the “unfair” disadvantage that tenants have when applying for different types of credit compared to those who are home owners with mortgages.

Bad credit record

“One of the worst problems with having a bad credit record is if that, if you are buried in it, it closes down the whole of your life and stops you living. We need to address that,” Lord Bird said during the debate.

But despite Lord Bird’s noble intentions, and the support he received during the second reading from leading peers, the government minister present – Lord Gates – warned that greater regulation of lenders, as outlined in Lord Bird’s Private Members Bill, was not the desired government solution.

He said that while he recognised “that banks must take into account other factors when assessing mortgage applications” and that he shared the bill’s objectives, “additional regulatory requirements could generate a significant burden for [lenders]”.

Technological challenge

“For example, given that mortgage lenders currently lack easy access to rent payment data, this approach would force them to go out and acquire it before making each new loan, which represents a significant logistical and technological challenge.

“This would not be in keeping with our aim to make Britain the best place in the world to do business.

“Furthermore, anything that places a burden on lenders could negatively impact the availability of credit in the future; if we make it harder for lenders to offer mortgages to rental tenants, they may decide to offer fewer of them.”

Sheraz Dar, CEO of CreditLadder, said: 'We fully support Lord Bird’s Private Members Bill and its aims of helping tenants access credit more fairly and affordably.

"Working with Experian's Rental Exchange means tenants can pay their rent through CreditLadder which is then added to their Experian credit score."

CreditLadder can help you improve your credit score

If you want to improve your credit position by reporting your rent payments, CreditLadder is the only way to improve your credit score and position across all four of the main Credit Reference Agencies in the UK, namely Experian, Equifax, TransUnion and Crediva. Building up a high credit score has a lot of benefits, including helping you access finance at better rates - this can also help save you money.

CreditLadder also runs a free mortgage application service in partnership with Tembo which will tell you how much you could borrow.

Remember the information provided in this article is for information purposes only and should not be considered as advice.