Cautious optimism over Ottawa’s plan to allow rent to count toward credit scores

TORONTO – Companies that already offer ways to let rent payments count toward credit scores are welcoming the federal government’s plan to spread the practice further.

Andrew Graham, chief executive of Borrowell, said on Thursday he was encouraged by the government’s commitment.

“We’ve been saying for a couple of years how important it is for consumers to be able to report rental payments to build their credit history, so I was pleased to see the government taking some action.”

Prime Minister Justin Trudeau said Wednesday there is something fundamentally unfair about paying $2,000 a month in rent while those paying the same amount for a mortgage gain equity in their home and build their credit scores.

He said the government wants landlords, banks and credit agencies to ensure rental history is factored into credit scores, giving young first-time buyers a better chance of getting a mortgage. with a lower interest rate.

Graham said open banking, which will allow consumers to securely share their banking details with third-party financial players like Borrowell, is crucial to the success of the program.

“What we’ve been saying to the government and, frankly, to anyone who will listen, is that what we really need is open banking.”

Zac Killam, CEO of FrontLobby, which also provides rental reports to credit bureaus, said he has been working to achieve greater adoption for years.

“We welcome all efforts to increase education and awareness about the enormous benefits rent reporting can have,” he said by email.

However, reporting rental income only helps build a credit score if it is paid on time regularly. With the cost of rent and the cost of living in general rising sharply, many are under pressure and may not benefit, warned Elizabeth Mulholland, executive director of the charity Prosper Canada.

“It is a double-edged sword”.

He said it’s important for people to have control over whether they want data shared with the credit bureaus.

“If you just build it across the board, it could be problematic for a lot of low-income and vulnerable people,” Mulholland said.

“We don’t want to leave those people behind anymore. And those challenges go straight up the income scale all the way to the middle class.”

He also said the program should be done in the context of open banking, where structures are in place to protect both the data and the way it is used.

The Canadian Bankers Association said in a statement that it is working collaboratively with the government to explore new ways to serve Canadians and will evaluate the impact of the new policy as details are revealed.

More details about the program are expected in the next federal budget.

This report by The Canadian Press was first published March 28, 2024.