Rent Reporting: How It Makes Things Fairer for Canadian Renters

It’s not easy being a renter in Canada. As rents continue to rise, young people in particular are spending a higher proportion of their income on housing. In fact, we know that young people are spending more on housing than any other generation. This presents a twofold challenge for renters who aspire to own property: with such high rents, there is little left to save towards a down payment at the end of the month, plus those massive rent payments don’t count towards building your credit history. This feels particularly unfair when you consider that the mortgage payments that homeowners make do contribute towards building credit.

That’s why we welcomed this week’s announcement from Prime Minister Justin Trudeau and Deputy Prime Minister Chrystia Freeland. They announced measures to make Canada fairer for renters, including a plan to amend the Canadian Mortgage Charter to ensure rent payments count towards building credit.

At Borrowell, we’ve long advocated for rent to count towards credit scores and credit history, and this belief was what drove us to launch Rent Advantage in July 2022: the first rent reporting service in Canada that lets renters report their rental payments to Equifax Canada without landlord involvement.

In its March 27 announcement, the federal government also unveiled plans to create a Renters’ Bill of Rights, that would introduce a nationwide standard for lease agreements, as well as requirements for landlords to disclose a price history for their property.

How much can rent reporting improve credit scores?

Based on Borrowell data from thousands of rent reporting subscribers with credit scores of 600 or under, those who made on-time payments on all their accounts saw an average credit score increase of 32 points within 7 months.

A 30-plus-point bump could mean the difference between getting approved for prime mortgage rates instead of non-prime rates. This borrowing cost difference could be more than one percentage point in some cases. That’s roughly $3,900 extra interest on a new $400,000 mortgage.

In addition, 100% of Borrowell members who did not have a credit score before signing up for Rent Advantage established a credit score after Rent Advantage was added to their Equifax Canada credit report. 

Which renters will rent reporting help the most?

Rent reporting can particularly help the approximately 3.8 million Canadians with lower credit scores of 660 or under.

We know that consumers with lower credit scores are more likely to be renters. Based on a Borrowell survey in 2022, 68% of those with low credit scores were renters, which is troubling when you consider that 32% of households in Canada are rented.

What can I do to start reporting my rent?

If you are a renter who makes on-time rental payments, we encourage you to try out Rent Advantage - you don’t even need to involve your landlord. You connect to the account where you pay your rent, and you select your rent transactions. These payments will be reported to Equifax Canada and will start counting towards building your credit history, payment history and credit mix: three factors that can have a big impact on your credit score.

For more information on how rent reporting works or how credit scores work, please see these additional articles:

• Can You Build Credit by Paying Rent?

• How to Choose a Rent Reporting Service

• What Is A Credit Score And Why Does It Matter?

The importance of open banking

While we applaud this announcement, we are keen to remind the government that in order for rent reporting to work to its full potential and deliver the most benefit to renters, this measure needs to be coupled with the implementation of open banking in Canada.

Open banking, otherwise known as consumer-driven banking, is a secure way for financial data to be shared between consumers and fintech companies, and is the norm in other countries like the UK and Australia. With open banking in place, fintechs like Borrowell would be able to deliver innovative financial services, helping Canadians to manage their finances with confidence and ease. Without it, it’s impossible to automate rent reporting, putting the onus on the renter to manually confirm their payments every month.

The Bottom Line

The announcement on March 27 is good news for renters in Canada. We look forward to seeing the details that will emerge in the budget on April 16. Regardless, we’re pleased that the government has acknowledged the struggles faced by many, especially young people, in balancing high rental costs with aspirations of homeownership.

As we move forward, it's imperative for policymakers to continue supporting initiatives like rent reporting, ensuring that all Canadians have equal opportunities to build their financial futures. By doing so, we can create a fairer and more inclusive financial system for everyone.

For more information on Borrowell’s rent reporting service, visit Rent Advantage. For media inquiries, please contact [email protected].