Major Experian credit score shake up will include new kind of payments for first time | Personal Finance | Finance
Experian will now count rent payments into credit scores for the first time, changing the way lenders evaluate loan applications. This revision will provide a more comprehensive view of information about credit reports and methods to improve scores.
The changes will ensure that the score range, previously 0-999, will now go up to 1,250. All five bands will be updated with new names and renewed descriptions; The terms “weak” and “very weak” will be eliminated and the color red will be used to make it less disruptive to debtors. Due to expanded scoring, over 40% (44%) of people are expected to lower their score range following the changes. Experian said 42% will likely move up one band, while 14% say the score range will remain the same.
Experian emphasized that these changes will not affect someone’s ability to get a loan, while mortgage, loan or credit card eligibility remains unchanged.
A credit score is a personalized number that lenders use to evaluate creditworthiness, or the likelihood that a borrower will repay money. A higher score means borrowers are more likely to be approved for a loan and be offered better rates.
It was stated that the new model takes into account new data such as rent payments, as well as financial behaviors that banks and lenders increasingly value.
This includes reducing overdrafts, avoiding credit card cash advances and making additional mortgage payments, as well as looking more thoroughly at regular mobile phone contract payments and the frequency of switching providers.
According to Experian, the scoring changes will provide individuals with a clearer understanding of their borrowing capacity and provide additional methods to improve their scores.
Edu Castro, Experian’s general manager of consumer services in the UK and Ireland, said: “The way people manage their money has evolved and so has our score.
“Our new Experian credit score better reflects important daily financial behaviors like paying rent or reducing overdraft, providing a clearer understanding of the information in your credit report.
“This means people have a more personalized view of how they are doing financially and more practical ways to improve their scores, helping to unlock better borrowing opportunities for the future.”
While those who are expected to benefit from these changes include those who want to improve their scores, this is proving to be especially beneficial for those with limited credit history.
The new scoring system will be available in November and will cover all customers in the UK by the end of 2025; Existing customers will see their points automatically refresh and receive email notifications when accessed.
Users of the free app and credit score service will have access to new features, including indicative examples of how financial behavior affects scoring, while a more comprehensive and personalized assessment will be available in the paid service.
Borrowers also have the option to view their entire credit report for free.
Experian, one of the three main credit reference agencies, said lenders primarily look at three factors when someone applies for credit: affordability (including income, employment status and spending), credit report and score (reflecting how they have managed credit over the last six years) and the lender’s own records (to see if they have been a customer of that lender before).
A group of MPs, credit unions, business groups and charities have written an open letter to Chancellor Rachel Reeves, advocating for a united national approach to ensure rent payments are consistently included in credit scoring.
They are calling on the Government to take advantage of the upcoming publication of its national financial inclusion strategy to implement reforms to address this issue, such as giving tenants the right to opt-in for rent payments to be added to their credit file and creating rental data reporting schemes.
