Good News Tenants: Rental Payments Can Now Help You Build Credit

According to recent government statistics, 27% of Canadians who currently rent their home say they plan to purchase a property in the next two years, and to get a mortgage, of course, you need good credit. But traditionally, paying your rent on-time has not counted towards building credit, even though paying your mortgage as a home owner does.

That has changed. The introduction of the Landlord Credit Bureau (LCB) now allows Canadians to use their rent payments to build credit, providing a valuable opportunity for renters seeking to enter the real estate market and secure better financing options.

Understanding Rent Reporting in Canada

Rent reporting involves submitting rent payment data to credit bureaus where it is used to update credit reports and calculate credit scores. Unlike payments on loans, credit cards, or mortgages, rent payments are not typically reported automatically.

To have their rent payments reflected in credit reports, renters must enrol in a rent reporting program.

How Rent Reporting Works

There are two primary ways to report rent: individual enrolment programs and those requiring landlord cooperation.

For example, the Borrowell Rent Advantage program allows renters to report their payments independently by linking their bank accounts and entering lease details on the platform. This option also permits reporting of up to 24 months of past rent payments, enhancing credit history.

In contrast, FrontLobby requires the involvement of both the renter and the landlord. Both parties must create accounts, and the landlord must submit payment data monthly. Note that FrontLobby only reports current and future payments from the time of enrolment; past rental history cannot be reported.

This payment data is then typically reported to Equifax on the last business day of the month following the payment. For instance, rent paid in July will be reported to Equifax on the last business day of August.

Benefits of Reporting Rent Payments

Reporting rent payments can positively impact your credit profile without incurring additional debt. Timely rent payments contribute to your payment history (35% of your credit score) and the average age of your accounts (15% of your credit score). Regular reporting of rent payments over time can significantly improve your credit score.

However, missed or late payments will negatively affect your credit score if reported. Consistent, on-time rent payments not only fulfill your rental obligations but also enhance your credit profile when reported.

If you’re ready to make the jump into homeownership, our team is ready to help. Contact Spectrum today at 416-736-6500.