Experian will now consider rental payments in credit scores for the first time, altering how lenders assess credit applications. The overhaul will provide a more comprehensive view of information on credit reports and methods to boost scores.
The changes will see an extension of the score range, previously 0-999, now reaching up to 1,250. The five bands will also be updated with new names and refreshed descriptions – eliminating “poor” and “very poor” and the use of the colour red to be less distressing to borrowers. Due to the expanded scoring, over 40% of people (44%) are expected to drop down a score banding following the changes. Experian revealed that 42% are also likely to move up a banding, while 14% will see their score band remain the same.
Experian emphasised that these changes will not affect someone’s ability to obtain credit, while eligibility for mortgages, loans or credit cards remains unchanged.
A credit score is a personalised number that lenders use to assess creditworthiness, or how likely a borrower is to repay money. A higher score means borrowers are more likely to get approved for a loan and offered better rates.
The new model takes into account new data, such as rental payments, as well as financial behaviours that banks and lenders increasingly value, it said.
This encompasses reducing overdraft usage, steering clear of credit card cash advances and making additional mortgage payments, alongside a more comprehensive examination of regular mobile phone contract payments and frequency of provider switching.
According to Experian, the scoring modifications will provide individuals with a clearer understanding of their borrowing capacity and additional methods to enhance their rating.
Edu Castro, managing director of Experian consumer services in the UK and Ireland, said: “The way people manage their money has evolved, and our score has evolved too.
“Our new Experian credit score better reflects more of the everyday financial behaviours that matter – like paying rent or reducing overdraft use – offering a clearer understanding of the information on your credit report.
“This means people get a more personalised view of how they’re doing financially and more practical ways to improve their score, helping unlock better borrowing opportunities for the future.”
Individuals anticipated to gain from these alterations particularly include those seeking to enhance their rating, whilst it proves especially beneficial for those with restricted credit histories.
The fresh scoring system will begin its rollout in November and will encompass all UK customers by the conclusion of 2025, with current customers witnessing their score automatically refreshed and receiving email notifications once accessible.
Users of the free app and credit score service will have access to new features, including indicative examples of how financial behaviours impact scoring, while a more comprehensive and personalised assessment is available on the paid-for service.
Borrowers also have the option to view their full credit report at no cost.
Experian, one of the three main credit reference agencies, stated that when someone applies for credit, lenders are primarily looking at three factors: affordability (including income, employment status and expenditure), their credit report and score (which reflects how they’ve managed credit in the past six years), and the lender’s own records (to see if they’ve been a customer with that lender before).
A group of MPs, lenders, business groups and charities have penned an open letter to Chancellor Rachel Reeves, advocating for a unified national approach to ensure rental payments are consistently included in credit scoring.
They’re urging her to utilise the forthcoming publication of the Government’s national financial inclusion strategy to implement reforms to address this issue, such as giving renters the right to opt-in to have rental payments added to their credit files and establishing rental data reporting schemes.