Creditworthiness Bill Blog 1

Creditworthiness is on a Journey, but it needs a Passport

Next week the Creditworthiness Assessment Bill 2017-19 gets its second reading. For the UK’s 11 million renters, this is a bill, which if passed, will level the playing field with mortgage payers. At the moment rental payments aren’t recorded or recognised in the same way as mortgage payments are, so even the most reliable tenant, who has been paying their rent on time for years, will not see that reliability reflected in their credit file. Ultimately that means that some of the country’s least well-off people end up paying the most to borrow, including repayment contracts, white goods and mobile phones.

What is the Creditworthiness Assessment Bill?

The bill was first presented by social entrepreneur, homelessness campaigner and founder of The Big Issue, Lord Bird, back in the summer. He was reported then as saying: “Generation rent has been hit hard and they deserve fair access to credit. We want to empower more people to get on in life.”

And if Lord Bird is championing a cause, we need to sit up and listen as he knows what he’s talking about. As a former rough sleeper himself, when he entered the House of Lords in 2015, it wasn’t his first time over the threshold of Westminster. 47 years previously he did a short lived stint in the House of Lords kitchens washing dishes.

Today Bird is on a mission to dismantle poverty and to do it by helping with the painstaking analysis and amendment that goes into making good, workable, effective legislation.

In the case of the Creditworthiness Assessment Bill, the nitty gritty is an endeavour to amend section 64A of the Financial Services and Markets Act 2000. This proposed amendment would impose a requirement of the FCA to make rules to ensure that firms carrying on credit related activities take into account rental payment history and council tax payment history when assessing a borrower’s creditworthiness.

Of course that makes sense. At Castlight, we wholeheartedly endorse Lord Bird’s objective of ensuring everyone is enfranchised with fair access to credit.

How Can We Analyse Creditworthiness?

But as with all credit access, it’s crucial that the borrower can afford the credit. Lord Bird’s legislation is not going to open up new credit avenues to all of the UK’s 11 million renters. That’s his point. In the same way that its reliable mortgage payers who secure good credit files, it should also be reliable rental and council tax payers securing the same good credit files.

The question that’s hanging is – how will renters easily be able to demonstrate their track history of reliable payments.

If you’ve been reading my blogs you’ll know that our Affordability Passport can, within minutes, categorise all the transactional spending of an individual’s account. At the press of a button, a full history of rental and council tax payments can be isolated and reported. We anticipate that our Affordability Passport, in tandem with this bill, will help to play a important role in ending the discrimination against renters and opening up new opportunities for fair and affordable credit.

Lord Bird’s Creditworthiness Assessment Bill has started on its parliamentary journey. And you can’t go far without a Passport, can you?