Rent Payments to Build Credit Score

Rent Payments to Build Credit Score with Equifax, thanks to LCB

I recently came across an interesting read on on how renters can now use rent payments to build their credit score.

When Zachary Killam was a renter years ago, he found it strange that all his rent payments counted for nothing on his credit score.

“When I moved into my first place, I had a $300 credit card limit. I paid my rent on time, but it always struck me: Why isn’t my rent ― which is of course my largest expense each month ― not on my credit record? I have a credit record for my phone bill but not my rent.”

As CEO of the for-profit Landlord Credit Bureau (LCB), Killam has finalized a deal with Equifax that will allow tenants to have their rent payments count towards their credit score. Anyone who signs up for a tenant record with the Landlord Credit Bureau will have their rent payments reflected in their Equifax credit score. However, this only applies to Equifax’s score, and not to scores at Transunion, Canada’s other consumer credit agency.

We should be giving credit to consumers for paying their rent on time. Zachary Killam, CEO, Landlord Credit Bureau

This is still welcome news presently, given how the COVID pandemic has impacted incomes and renters. Firstly, inability to pay rent during this crisis period shouldn’t have to damage someone’s credit rating. Secondly, there are many renters with poor credit scores who actually have a good record of paying their rent on time. When they look for change, they face a challenging time when landlords check their credit scores.

According to Killam, this move could especially help newcomers, who often struggle to build credit in Canada because their records from back home aren’t recognized here.

“For anyone who’s been financially impacted by COVID, as long as they communicate with the landlord and set up a payment plan, they can still keep improving their credit rating with Equifax. There is no negative impact for someone in that situation.”

But remember, late payments, and damage to the property, can negatively affect a tenant’s credit rating. The service is now available in all provinces except Quebec for now.

What are Credit Scores & Credit Reports

These are very important concepts here in Canada.

Basically, your credit report and credit score are ways of keeping track of and evaluating how you use credit. Lenders like credit cards, car dealerships, insurance companies want to know how you have handled credit in the past to determine how well you are likely to handle it in the future. In simple terms, how likely are you to pay in time.

As a real estate buyer or renter, mortgage lenders and landlords require this information too.

If you have a poor credit rating or credit score, you:

  • could be denied credit or you may need to obtain a co-signer to be approved for credit. In real estate transactions, this can be a common situation for newcomers.
  • may have to pay a higher interest rate.
  • likely not be able to buy or rent the home or apartment you want.

A credit report is a report based on your credit history. It is one of the main tools that lenders use to decide whether or not to give you credit. Credit reports can be obtained from Equifax Canada or TransUnion Canada.

A credit score is a number that shows your credit information at that given point in time. It indicates the risk you represent for lenders on a scale from 300 to 900. High scores on this scale are good. The higher your score, the lower the risk for the lender.

Importance of Credit Score & Rating in Real Estate

From a real estate perspective too, it is prudent to know about credit check and to review your credit score at least once a year.

For work permit holders, newcomers and millennials, it is very important to start building your credit, not only for day-to-day credit needs, but also to buy or rent your own home or condo.

We regularly work with work permit holders, newcomers, renters & millennials to help them buy homes & condos in the GTA. Find out about renting in Mississauga & area and our unique rent now, buy later program.

Find more information on credit reports & scores on the official government site.

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