Borrowell will begin reporting rent payments to Equifax Canada
Renters across Canada will soon be able to have their monthly rent payments included in their credit history.
Fintech company Borrowell Inc. said on Tuesday it will begin reporting rent payment information to Equifax Canada, one of the country’s two major credit bureaus, before the end of July. The service, called Borrowell Rent Advantage, will be available to those with a user account with the company for a monthly fee of $5.
“As a tenant, you don’t get credit for making these payments on time because the credit bureaus aren’t able to see them,” said Andrew Graham, chief executive and co-founder of Borrowell, which offers Canadians a free Equifax credit. write checks and match them with loans and credit products for which they may be eligible. “For the first time in Canada, we are enabling tenants to solve this problem by creating a credit history with their rental payments.
The announcement comes at a time when rapidly rising mortgage rates are forcing a growing number of young adults to put plans to buy a home on hold even as they face rising rents as renters.
Canadians who rent their homes often pay more than those who pay mortgages on a monthly basis, said Julie Kuzmic, senior consumer compliance officer at Equifax Canada. “We want to be able to add this information to their credit report to paint a more accurate picture.”
A history of on-time and full payments generally helps consumers establish a good credit score, which estimates a borrower’s likelihood of repaying creditors. But credit scores have traditionally relied on debt data rather than bill payment. This meant that while landlords could build up a credit history through their mortgage payments, the fact that a tenant paid their rent by the due date generally didn’t matter.
While third-party vendors have provided rent payment data to credit bureaus in the United States for years, Canada is lagging behind.
Some landlords in Canada are submitting rent payment information to credit bureaus, but Borrowell’s new service will be the first to let tenants self-report their rent payments, Kuzmic said.
Reporting rent payments to credit bureaus can help Canadians who don’t own a home improve their credit score, which could eventually allow them to access more competitive mortgage rates when they’re ready to buy. Mr. Graham said.
It is unclear, however, to what extent the Borrowell subscription would also benefit low-income tenants.
Low-to-moderate income households in Canada are more likely to rent and have poorer credit scores or no credit history. A recent survey conducted by Borrowell and answered by 2,873 respondents with below average credit scores of less than 660, found that 68% were renters. By comparison, about 30% of households across the country rent, according to Statistics Canada.
Low-income renters often have to resort to high-cost debt, borrowing from entities such as payday lenders that don’t necessarily report payment data to credit bureaus, said Brenda Spotton Visano, professor of economics and in public policy at York University.
The ability to establish a credit history with rent payments could help low-income tenants in ways that go beyond the ability to access credit products such as credit cards and loans. automobiles and to do so at lower interest rates, said Ms. Kuzmic. For example, a good credit score could help them qualify for a new lease or improve their job prospects, as many landlords and employers require credit checks when considering applicants for rental or housing. employment.
But Borrowell’s $5 monthly fee for its rent declaration product is likely to be a financial barrier for low-income households, Professor Spotton Visano said.
Mr Graham, for his part, argues that Borrowell will provide a key service. While banks and other lenders provide information on mortgage payments, it has been more difficult to receive reliable data from the myriad of landlords large and small who collect rental payments.
Borrowell will gather and verify information from tenants who sign up for the new offer and connect the bank account from which they pay the landlord. Tenants must indicate which monthly transaction constitutes their rent payment.
Borrowell currently has over two million users across Canada. Of these, more than two-thirds do not have a mortgage on their credit profile and are likely renters, the company said.
Like all other Borrowell users, those who sign up for Rent Advantage will receive marketing emails about financial products such as loans and credit cards, although they may opt out.
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