It’s a relatively new concept in Canada, but several tools and services are emerging to help renters report on-time payments to credit bureaus as a means to establish credit without taking on additional debt. In this article, we’ll explain how you can improve your credit score with rent reporting, and we’ll discuss the benefits, available tools and how to get started.
“Using a rent reporting tool is a simple way for renters to leverage their on-time payments, helping them build credit without taking on additional debt.”
—Cathy Plowman, Credit Canada Credit Counsellor
What is a credit score?
A credit score is a three-digit number (from 300 to 900) that reflects how well someone manages credit—for example, whether they make loan payments or pay credit card bills on time. The higher your score, the more creditworthy you are considered to be.
Read “What is a credit score?” in the MoneySense glossary.
What are rent reporting tools?
Normally, rent payments don’t show up on a credit report, but a rent reporting tool can record these payments with one or both of Canada’s main credit bureaus—Equifax and TransUnion. This helps young people, newcomers, and those recovering from a bad credit score to build or improve their credit score by showing a history of consistent, on-time payments.
A solid credit score is more than just a number—it opens doors to better financial products, saves you money and improves opportunities for renting, car insurance and employment. Having good credit is important because it can help you qualify for products when you need them, and get the best interest rates.
While landlords in Canada typically require a credit check for you to qualify for a rental, monthly rent payments are not automatically included in your credit report unless you enroll in a reporting program. “Using a rent reporting tool is a simple way for renters to leverage their on-time payments, helping them build credit without taking on additional debt,” says Cathy Plowman, Credit Canada Credit Counsellor.
Have a personal finance question? Submit it here.
Benefits of rent reporting
Rent reporting can help those with a poor credit history or no credit history to build a better credit score, which is crucial for securing loans, getting better interest rates, and even renting or owning a home in the future. When on-time rent payments are reported to credit bureaus, it shows lenders you are financially responsible. Here are more benefits.
Your credit score can increase—here’s how long it takes
Over time, these positive reports can boost your credit score. While no one can predict how much your score will increase, according to Borrowell, subscribers with credit scores of 600 or under saw an average increase of 32 points within seven months. Renters using FrontLobby also reported credit score jumps of 36 to 84 points in the first six months.
Better access to loans and mortgages
Rent reporting can make it easier for renters, especially those without a traditional credit history, to access financial services, such as a car loan or a mortgage. These tools are particularly valuable for people who are new to Canada, younger renters, or those who prefer renting over owning, and who may not have much credit history. “Including rent payments in credit reporting is a big step toward making financial opportunities available to more people, especially those who have had trouble building credit in the past,” says Plowman.
It’s good to be financially disciplined
When rent payments are tracked and reported to the credit bureaus, renters can be motivated to keep up with their payment schedule. Rent reporting helps renters avoid late fees and penalties by encouraging timely payments. It also may foster better financial habits as renters become more aware of their budgets and spending.