Low credit score? Here’s how Canada’s new Renters’ Bill of Rights could help improve it

For many, one of the most significant roadblocks to owning a home could be their credit score.

Your credit score can directly impact whether you qualify for a mortgage and the amount of mortgage you can secure.

It could also affect the size of a down payment a lender will need, which determines whether you have to pay for private mortgage insurance (PMI) and, if so, how much, explains credit bureau company Equifax.

According to Loans Canada, the minimum credit score needed to qualify for a mortgage in 2024 is 620 to 680, depending on the lender.

The traditional way to boost your credit score is to own a credit card and build a credit history by making timely payments. But with the soaring cost of living, this may be easier said than done.

The federal government hopes to change this by giving renters a hand-up on their credit scores.

Prime Minister Justin Trudeau recently announced his proposal for a new Canadian Renters’ Bill of Rights to help young people get a foothold in the housing market.

One of the main action items is to make credit bureaus take rent payments into account when calculating someone’s credit score. The goal is to help more Canadians qualify for a mortgage.

We spoke with Andrew Graham, co-founder and CEO of Borrowell, a free credit score provider in Canada, about how exactly this plan could help prospective homebuyers, and why it’s been a long time coming.

“Already too many challenges facing renters”

credit score


Graham says that today, Canada’s credit system considers when someone pays their mortgage on time but largely ignores when someone pays rent on time.

He adds that as a result, renters’ credit scores are, on average, lower than homeowners’, making them disproportionately represented among Canadians with low credit scores.

“It’s one more challenge for renters in an environment where there are already too many challenges,” explained Graham.

“It makes it that much harder for a renter to eventually qualify for a mortgage and to demonstrate to a mortgage lender that they have a history of paying bills on time.”

How could the Bill of Rights help improve your credit score?

If you’re looking for a way to boost your credit score, Borrowell has a rent reporting tool called Rent Advantage. This tool allows tenants to share their rent payment history with Equifax so they don’t have to rely on their landlord.

Graham says that if a renter’s credit score is between 300 and 600, they’ll typically see an average increase of around 5% (32 points) within seven months through rent reporting.

“That could be the difference between qualifying for a mortgage and not,” he explained. “It could be the difference between getting a less expensive mortgage that could cost thousands of dollars less over its term or not.”

And for those who don’t have a credit score because they’re newcomers to Canada or young people, Graham says rent reporting helps them establish a score relatively quickly.

The Rent Advantage tool has been up and running for almost a year, and Graham says it has received positive feedback from renters and people working in the housing industry.

He even heard from a bank CEO who said they’d love to know if someone has paid their rent on time when deciding whether to approve a mortgage.

Are there any challenges with implementing rent reporting?

Graham says some logistical challenges have slowed the mass use of rent reporting.

He explains that there are a relatively smaller number of mortgage and credit card providers (banks) than the thousands of different landlords across the country.

“Getting all of that group to report rent payments has been a real challenge, and it’s taken the advent of technology that allows consumers to share their rental history without involving your landlords to really change that,” said Graham.

The Borrowell CEO added that another major challenge is Canada’s lack of open banking, which is a secure way for you to share your financial data with financial companies like credit bureaus.

“To show that you’ve paid your rent on time, you need to be able to show those payments,” he explained. “Canada’s one of the only developed countries that doesn’t have a set of rules to allow consumers to do that easily.”

Graham, who is on the national steering committee for open banking, says the committee has been calling on the government for years to implement rules surrounding consumer-driven banking.

He hopes these challenges will be addressed when the federal budget is presented on April 16.

Would you look into rent reporting to increase your credit score? Let us know in the comments.