The government has backed three startup companies offering fintech apps to renters struggling to get on the property ladder.

As part of the government’s Rent Recognition Challenge, launched in December 2017, the three winning tech firms have been awarded a share each of a £2m grant to develop their solutions to improve renters’ credit scores.

Currently, rent payments are not routinely recognised in credit scores and mortgage affordability assessments making it harder for renters to get a mortgage and get on the property ladder.

The successful start-ups, CreditLadder, Bud, and RentalStep, were chosen by judges in a ‘Dragons’ Den’ style challenge, in which they created a tech solution for renters to record and share their rent payment data towards their credit score.

John Glen, economic secretary to the Treasury, said monthly rent was often the biggest expense that people faced, yet most lenders are unable to take it into account when working up a credit score.

He said: "Three pioneering start-ups have found a solution, and we are giving them the investment and support they need to help millions of renters across the country achieve their dream of owning a home."

Bud is building an artificial intelligence driven rental recognition tool that banks can integrate into their own apps so that renters can use their payment history to help with mortgage applications.

CreditLadder allows tenants to report their rent payments, with the capacity for landlords and letting agents to introduce tenants to the platform.

RentalStep is a landlord-tenant matching platform, allowing landlords to purchase a tenancy management service through the platform and for rental payments to be tracked and reported.

Charlotte Crosswell, chief executive of Innovate Finance and one of the challenge’s judges, said 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."

David Hollingworth, associate director of communications at London & Country Mortgages, said for aspiring first-time buyers one of the biggest frustrations was saving for a deposit when also paying rent, which makes up a substantial proportion of income.

He said: "First-time buyers are not receiving recognition for a good track record in rent payments from lenders' affordability assessments.

"If this issue can be harnessed, and tech seems like the obvious platform to leverage that, it will provide first-time buyers with a stronger foundation."

rachel.addison@ft.com