It’s no secret that owning a home in Canadian cities has become increasingly out of reach.
Adding insult to injury is the fact that sky-high rent prices in many cities make it difficult to save to become a homeowner — rents can cost more than some monthly mortgage payments.
Throw in climbing interest rates and the prospect of ever owning a sliver of property may be a daunting one for Canadian renters.
But now, there’s (some) newfound hope; it’s a little easier for renters to begin their journey to the increasingly illusive land of Canadian homeownership, thanks to a soon-to-launch program from Canadian financial services company Borrowell. Among the first programs of its kind in Canada, renters will be able to use their rent payments to help to build their credit history.
Best of all, they’ll be able to do so without any involvement from their landlord.
The payment history on someone’s credit report is the largest factor in determining their credit score, which is an important factor considered by lenders to assess a borrower’s credit-worthiness. When the Borrowell Rent Advantage program launches next month, renters will be able to use good payment behaviour on their substantial rent payments to count towards building payment history and therefore potentially qualifying for better rates on loans, mortgages, and credit cards in the future.
Reporting this information to Equifax Canada — a data, analytics, and technology company — and Canada’s largest consumer credit bureau, Borrowell Rent Advantage provides an opportunity for renters to build credit history, similar to how homeowners can build credit with their monthly mortgage payments.
Renters sign up to Borrowell and connect the bank account from which they make rent payments. There is an affordable monthly subscription fee of $5 and consumers can cancel any time without financial penalty — although consumers are encouraged to report for as long as possible to create a significant historical record. “As payment history makes up a significant portion of the credit score calculation, individuals may benefit from a longer period of consistent reporting of this information,” reads a press release from Borrowell.
There was a loud and clear need for such a service to disrupt the credit industry. There are 3.8M Canadians with credit scores of 660 or under; a June survey of Borrowell members found that of those with this credit score range, 68% were renters compared to the Canadian average of 32% of households being renters, according to Statistics Canada.
“We want to make the credit system work better for underserved Canadians. This program was built with renters in mind and allows them to use rent payments they’re already making to build credit history so they may qualify for more financial products at better rates in the future,” said Andrew Graham, CEO and Co-Founder of Borrowell. “Tenants who demonstrate good payment behaviour should be able to benefit from those actions, the same way a homeowner paying a mortgage would — it’s only fair.”
Generally, buyers with credit scores of about at least 660 to 680 can start accessing more competitive mortgage rates, subject to their lender’s criteria.
“Rent is often the largest expense Canadians have each month. Recording payment history can give lenders a more accurate picture of a consumer so they can better understand the consumer’s credit-worthiness,” said Sandy Kyriakatos, Equifax Canada’s Chief Data Officer. “We are excited to work with Borrowell to enable renters in Canada to report their rental contributions while expanding the completeness of our payment history data. It’s a win-win for both consumers and lenders.”
Rent Advantage will be available to a selection of Borrowell members starting this month and will be expanded to the public later this year. Interested consumers can sign up for the waitlist.
PUBLISHED: 2:16 PM JUL 19, 2022
Written By: Erin Nicole Davis
Photo By: Photo by Matthew Henry from Burst