Renters unable to secure a mortgage due to their lack of a credit rating could boost their eligibility through one of three startups backed by the Government.
CreditLadder, Bud and RentalStep have each won a share of £2 million as part of the government’s Rent Recognition Challenge. The challenge tasks entrepreneurs to create ways in which renters can record and share rent payment data.
All three winners of the challenge have said they will use the funding to further develop their business.
Rent Recognition Challenge
The Rent Recognition Challenge was launched in December 2017 in an attempt to tackle the growing number of people around the UK who are unable to get onto the property ladder.
Currently, rent payment histories are not taken into account when applying for a mortgage, as they are routinely ignored in credit scores. When applying for a mortgage, banks often fail to recognise that people may have been paying rent on-time, without fail for several years at a time.
This growing issue is creating a barrier for those seeking to buy property. According to the Family Resources Survey by the Department for Work and Pensions, the number of 35 to 54-year-olds who live as a private tenant has nearly doubled since 2006-07; addressing the issue of both rising rent prices and people’s inability to purchase property will prove a key challenge over the next decade.
John Glen, Economic Secretary to the Treasury said: “Monthly rent is often the biggest expense that people face. Yet most lenders are unable to take it into account when working up a credit score.
“Three pioneering start-ups have found a solution, and we’re giving them the investment and support they need to help millions of renters across the country achieve their dream of owning a home.”
The Winning Firms
The three winning start-ups of the challenge are:
- CreditLadder – The London-based firm enables tenants to report their rent payments, whilst allowing landlords and letting agents to introduce their tenants to the platform.
- Bud – The company’s AI-driven rental recognition tool allows banks to integrate it into their apps so that people can use their rental history to help them apply for mortgages and loans.
- RentalStep – Landlord-tenant matching platforms allow landlords to purchase a tenancy management service through the platform. Rental payments can also be tracked and reported through this service.
She said: “We are delighted to support the Rent Recognition Challenge and address this important issue of helping renters as they look to establish a credit history, helping their journey towards securing a mortgage in the future.
Crosswell added that innovative companies from across Britain’s fintech sector are playing a crucial role in addressing the issue.
“The Fintech sector has proven it can provide credible, innovative solutions”, she said. “We are delighted that government has recognised that Fintech companies have a significant role to play in this market.”