This is a relatively new concept in Canada, but a variety of tools and services are emerging to help renters pay on time to the credit bureau as a means to build credit without taking on additional debt. In this article, we will explain how to improve credit scores with rental reports and will discuss earnings, tools available, and how to get started.
“Using a rent reporting tool is an easy way for renters to use their on-time payments to help them build credit without taking on additional debt.”
– Cathy Plowman, Credit Canada Credit Advisor
What is a credit score?
A credit score is a three-digit number (from 300 to 900) that reflects the extent to which someone manages credit, for example, whether they pay on time or pay for credit card bills. The higher your score, the higher your credibility you are considered.
Read “What is a credit score?” in the moneysense glossary.
What is a rent reporting tool?
Typically, rent payments do not appear in credit reports, but rent reporting tools can record these payments through the major Canadian credit bureaus (Equifax and Transunion). This can help young people, new immigrants and those who recover from bad credit scores arrive Create or improve credit scores by displaying a consistent on-time payment history.
A stable credit score is more than just a number, it opens the door for better financial products, saving you money and improving rents, auto insurance and job opportunities. Having a good credit is important because it helps you qualify for the product when you need it and get the maximum interest rate.
While landlords in Canada usually need to have a credit check to qualify for rent, unless you participate in a reporting program, monthly rent will not be automatically included in your credit report. “Using a rental reporting tool is an easy way for renters to use their on-time payments to help them build credit without taking on additional debts,” said Cathy Plowman, credit consultant at Chritel Canada.
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Benefits of Rent Reporting
Rent reports can help those with poor credit history or no credit history to build a better credit score, which is crucial to secure loans, get better interest rates, and even rent or owning a home in the future. When the timely rent is paid to the credit bureau, it indicates that you are financially responsible. This is more of a benefit.
Your credit score may increase – how long does it take to be here
These positive reports can improve your credit score over time. While no one can predict how much your score will increase, subscribers with a credit score of 600 or below increased by an average of 32 points in seven months, Borrowell said. Tenants using Frontlobby also reported that credit scores jumped 36 to 84 points in the first six months.
Better access to loans and mortgages
Rent reports can make financial services more accessible to renters, especially those without traditional credit history, such as car loans or mortgages. These tools are particularly valuable for Canadian newbie, young renters or people who prefer to rent instead of having rent and may not have much credit history. “Including rent payments in credit reports is an important step in providing financial opportunities for more people, especially those who have struggled to build credit in the past,” Proman said.
Economic discipline is a good thing
When rents are tracked and reported to credit institutions, renters can be motivated to keep up with their payment schedule. Rent reports help renters avoid late fees and fines by encouraging timely payments. As renters become more aware of their budget and spending, it can also develop better financial habits.
