Rent Reporting Could Help Canadians Build Credit, but at What Cost?

In the recently released 2024 Budget, the federal government proposed changes to its Canadian Mortgage Charter that would support rent reporting to credit bureaus[1]. The budget states that encouraging Canadians to report their rent payments is part of a larger effort to “unlock pathways for more renters to become homeowners.” But this idea is nothing new. 

“Rent reporting has been available for years,” Grant Burwash, Chief Operating Officer at FrontLobby, a Vancouver-based rent reporting platform, said in an email. However, the government’s announcement does help create awareness, he added.   

So, if it’s been around for a while, then why is the government only now incorporating it into the charter? Well, despite the benefits it offers to prospective homebuyers, there are serious pitfalls to rent reporting that deserve careful consideration. 

What is rent reporting?

Rent reporting is when your rent payments are disclosed to one or both of Canada’s major credit bureaus, Equifax and TransUnion. This service is offered by third-party providers that typically charge a monthly fee. 

Unlike other monthly expenses that are automatically reported to the bureaus, such as credit card bills and car payments, you need to sign up for rent reporting for your rent payments to be disclosed. 

The pros

A healthy credit score can open doors to reaching some of life’s biggest milestones, like buying a house, a car or starting a business. But not everyone has access to financial products that build credit, like mortgages and credit cards. 

Rent reporting is a possible solution. Roughly half of people between 25 and 34 years old (54%) in Canada are renters, according to data provided in the 2024 Budget. If rent payments were reported to the bureaus — assuming they’re made on time — a significant number of Canadians could potentially strengthen their scores.  

In 2022, FrontLobby and Equifax released a study that found 48% of members who reported their rent payments were able to establish a credit score based solely on the reported rental data, suggesting that these services can be beneficial[2].   

The cons

“My own experience as a renter has been mixed,” said Abid Salahi, a renter in Vancouver, in an email. “While I have consistently paid my rent on time, I have witnessed firsthand the struggles of friends and acquaintances who have grappled with job losses, medical emergencies or other unforeseen circumstances that jeopardized their ability to keep up with rent payments.” 

A late rent cheque reported to a credit bureau can negatively impact a renter’s score and their ability to borrow money. As such, Canadians struggling to make ends meet, let alone build credit, may be less likely to opt into rent reporting — a service that was created, in part, to help vulnerable people build credit. 

“While I appreciate the intent behind this policy, I believe robust safeguards and provisions must be implemented to ensure that it does not disproportionately harm vulnerable renters,” said Salahi. “Mechanisms for dispute resolution, grace periods and exemptions for extenuating circumstances should be carefully considered,” he added. 

What to consider before signing up

If building your credit is a top priority and you consistently pay your rent on time, reporting your rent to the credit bureaus may be worth your while. There are several rent reporting companies offering the service, but there are some key points to be aware of before you sign up. 

Opting in

Depending on the company you use, both you and your landlord may have to opt in for the service. Some rent reporting companies do not require your landlord to opt in — you pay the reporting company, and they pay your landlord. However, the payment methods reporting companies use vary and may not align with what your landlord accepts. 

Monthly fees

Rent reporting companies typically charge a small monthly fee for the service — something to consider when weighing the pros and cons. It is unclear if the government’s proposed changes would push for free reporting, which would certainly make it more feasible for Canadians with tight budgets.

Other ways to build credit

If you struggle to make rent and rely heavily on flexible payment arrangements with your landlord, you may want to consider other ways to build credit before using a rent reporting service. 

Paying your car loan or credit card bill on time can help strengthen your score, as these payments are automatically reported to the credit bureaus. In some cases, your internet and phone bills are also reported — check with your provider to see if they disclose your payments to the bureaus. 

Credit cards, when used responsibly, can help build credit, as well. If you cannot qualify for a traditional credit card, you may be able to get a secured card, which doesn’t require a credit check. 

Regardless of the type of credit card you have, only charge what you know you can pay off in full at the end of the month.

Nerdy Tip: Check your credit report and score once or twice a year to track progress, catch errors and monitor how your payment activity is being recorded. You can get a free copy of your credit report from Equifax or TransUnion online, by mail, over the phone or in person.