The federal government’s move to encourage rent payments being counted toward credit scores has been welcomed by companies that already offer rent-reporting services, while tenant advocates and charities warn of potential pitfalls. Industry leaders say the policy could help many renters build credit, but they also stress the need for safeguards and clear implementation rules.
Andrew Graham, chief executive of Borrowell, said the government’s announcement is a positive step. “We’ve been saying for a couple of years how important it is for consumers to be able to report rental payments to build up their credit history,” he said, adding that the decision could help renters who currently lack traditional credit data.
Prime Minister Justin Trudeau noted the inequity between renters and homeowners: paying the same monthly amount in rent does not create equity or the same credit-building opportunity that mortgage payments do. The government’s aim is to have landlords, banks and credit bureaus work together so rental history can be taken into account when calculating credit scores, which could help first-time buyers qualify for mortgages with better rates.
Equifax Canada chief executive Sue Hutchison said the credit agency, which has been working on incorporating rent payments, welcomed the news. “We look forward to working with governments, the banks and other lenders to ensure this important evolution in Canada’s credit infrastructure is implemented responsibly,” she said.
Rent reporting, credit bureaus and open banking
Open banking—an infrastructure that allows consumers to securely share banking data with third-party financial providers—is seen by many as a key enabler for reliable rent reporting.
“What we’ve been telling the government and, frankly, anyone who will listen, is that what we really need is open banking,” Graham said, noting that it would streamline verification of payment histories while protecting consumer data.
Zac Killam, CEO of FrontLobby, which has offered rent reporting to credit bureaus since 2018, supports efforts to raise public awareness about the benefits. He said awareness of rent reporting remains low, especially among the groups that would benefit most.
Equifax estimated in a 2022 report that more than three million Canadian adults don’t have a credit score, while another seven million have only limited credit data. Bringing reliable rental-payment data into credit files could help many of those consumers establish or strengthen their credit histories.
FrontLobby’s model relies on both renter and landlord verification of payments, so it does not depend exclusively on open banking. A study FrontLobby conducted with Equifax found that rent payments were the only source of credit history for almost half of the service’s users, allowing them to reflect years of on-time payments on their credit reports.
At the same time, organizations such as Prosper Canada emphasize that rent reporting only helps if payments are consistently made on time. “It’s a double-edged sword,” said Elizabeth Mulholland, chief executive of the charity, noting that people under financial strain may suffer adverse credit consequences if missed rent payments are reported.
Mulholland urged that consumers retain control over whether their payment data is shared with credit bureaus and that the program be implemented alongside open banking protections so there are clear rules for data access and use.
Rent reporting could put more pressure on tenants
Tenant advocates say a formal rent-reporting system could be misused by some landlords to increase leverage over tenants. Douglas Kwan, director of advocacy and legal services at Advocacy Centre for Tenants Ontario, warned that landlords might use the threat of damaging a tenant’s credit score to pressure them during disputes over repairs or other issues.
“Their bargaining power is already much stronger than tenants’, and when you add private reporting mechanisms that are run by the landlord, it becomes not only problematic but dangerous,” Kwan said. Under today’s system, landlords seeking to resolve disputes or claim unpaid rent typically must go through provincial tribunals; adding private reporting could create additional pressure points.
Industry operators note some safeguards exist. Killam said FrontLobby’s reporting takes effect only when rent is more than 30 days late, not for brief delays. He also pointed out that landlords can already affect a renter’s credit by sending overdue rent to collections.
Borrowell’s reporting approach does not require landlord participation, which Graham argues is important because many small landlords lack the time or systems to participate. Still, questions remain about how credit bureaus will verify where electronic payments, such as e-transfers, are going and how to ensure accuracy before information affects scores.
More details to come in 2024 federal budget
The government has said it plans to amend the Canadian Mortgage Charter and will call on landlords, banks, credit bureaus and fintech companies to ensure rental history is considered in credit scores. Further implementation details are expected to appear in the upcoming federal budget.
The Canadian Bankers Association said it works collaboratively with government to explore ways to serve Canadians and will assess the impact of the proposed policy as more information becomes available. A spokesperson for TransUnion Canada said the agency is already assessing rental data to support consumers building credit profiles and to give potential lenders a more accurate view of a consumer’s creditworthiness. TransUnion encouraged governments to work with the credit reporting industry to evaluate the impact of rental data and how it should be reported.
As policymakers, lenders and technology providers move forward, advocates emphasize the need for clear consumer protections, options for consent, and robust data safeguards. Done well, rent reporting could open credit-building pathways for millions of renters; done without safeguards and transparency, it risks adding pressure on vulnerable households.
More about credit scores:
- Credit scores and credit reports: What newcomers to Canada need to know
- How to build credit history in Canada
- 6 things you didn’t know could be hurting your credit rating
- How to calculate your debt-to-income ratio—and why you should know this number