For most Canadians, housing makes up the biggest portion of their monthly expenses. Canadians have had the option to put mortgage payments towards their credit scores since 2012, but renters never had this option until recently.
The Toronto-based Landlord Credit Bureau (LCB) has partnered with credit agency Equifax to allow renters to have their rental payments count towards their credit scores. The online portal will allow landlords to register their properties and document tenant rental history in one place.
Anyone who signs up for a tenant record with the LCB will see their rental payments reflected on their Equifax credit score. The program does not, however, count towards Canada’s other consumer credit agency, Transunion.
Still, Credit Counsellor, Hailey Cooke said this could be a major benefit to lower-income, young renters, who have taken a significant hit amidst COVID-19.
“By making this information accessible, especially for young people and students who are probably establishing credit for the first time…reporting regular rental payments to the Credit Bureau offers a much needed alternative for those individuals,” she said.
Many landlords and rental companies consider credit score when selecting tenants, so poor credit can sometimes keep young renters or those with poor credit history from accessing housing.
“One of the most common anxieties that I deal with my clients personally, is that they might be left without a home,” said Cooke. “These fears are not unfounded.”
Up until now, said Cooke, there was no consistent way to differentiate between something like a poorly managed credit card and a well paid apartment.
“So the credit would be bad even if the rental history was good,” she added.
Many landlords require credit checks when selecting tenants, but most young people’s credit scores reflect their phone bills, and not much else. Having a credit card is one way to boost credit, but this can be risky for students who are trying to avoid debt.
That’s why some landlords, like London’s Dan Warren, don’t consider credit when renting to students.
“For students, I don’t check their credit ’cause it’s not useful to do so,” he said. “A lot of them probably have little to no credit. Most likely they pay their cell phone bill, so it’s not going to tell me a lot of about them.”
Warren added that he sees the potential risks involved with using an automated system to report rental payments.
“If they’re behind a few days on rent, that’s going to be added to their credit score, whereas, right now if somebody is a few days late, the landlord isn’t going to take them to court over that,” he said. “It’s one of those things where someone’s going to have to be right on top of their rent to make it worthwhile for them.”
Both Cooke and Warren agree though that this could be a useful option for International students or new Canadians that are looking for any way to establish credit.
“This is really going to be a gamechanger,” said Cooke. “Individuals who have never had credit in Canada are likely to struggle establishing credit for the first time. So [they have] the ability to now do this with rental payments, which most people are doing every month anyway.”
Warren said he personally would not be implementing the option for his renters, but said he could see how some landlords might benefit from the ability to recognize rental payments on credit scores.
“They could find that, they’re going to find tenants that are maybe more certain they’re going to be able to make payments, maybe,” he said.
The service is now available across all provinces except Quebec.
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