In a significant move towards financial inclusivity, the Canadian government has proposed changes aimed at empowering renters to build their credit histories more effectively. 

Historically, rent payments were not always reported to credit bureaus, limiting the ability of renters to showcase their responsible financial behaviours. However, recent adjustments have recognized the importance of rent payments in assessing creditworthiness, leading to reforms in credit reporting practices. 

Now more than ever, renters in Canada have the opportunity to leverage their rental payments to help their credit scores and enhance their financial prospects. Understanding the nuances of this evolving credit reporting landscape is crucial for renters seeking to navigate the complexities of personal finance and secure their financial futures. 

Understanding Your Credit Score as a Renter 

Understanding what a credit score is a first step to building a great credit history.

To make the most of these proposed changes, let's first get a grip on what a credit score actually is. It's like a financial report card, showing how responsible you've been with money in the past. In Canada, credit scores range from 300 to 900, with higher numbers meaning you're seen as more reliable when it comes to borrowing money or renting a place to live. 

Five main things affect your credit score, but the biggest one is your payment history. This counts for a whopping 35 per cent of your overall score. Basically, if you've been paying your bills on time, including your rent, your credit score will get a boost.  

But wait—there's more to your score than just paying your bills on time! Let's break it down into the five key factors that influence how your credit score shapes up. Understanding these factors can help you develop smart financial habits that help your credit. 

- Payment History (~35 per cent):This is a biggie. It's all about paying what you owe, whether it's your rent or other debts, on time and in full. The more reliable you are with payments, the better it looks on your credit report. 

- Debt-To-Credit Ratio (~30 per cent): This one's about how much debt you have compared to your credit limits. Keeping this ratio low—ideally below 30 per cent—shows lenders you're not maxed out and can handle more credit responsibly. 

- Credit History (~15 per cent): Your track record with credit accounts matters here. The longer and more responsibly you've used credit, the better it reflects on your credit score. It's like building trust with lenders over time. 

- Credit Inquiries (~10 per cent): Every time someone checks your credit, such as when you apply for a loan or a credit card, it leaves a mark. Too many inquiries in a short time can leave you appearing too risky to lenders, so it's best to space out credit applications. 

- Public Records (~10 per cent): This covers more serious matters, including bankruptcies, debts in collections and legal actions. Negative marks here can drag down your credit score, so it's important to steer clear of financial trouble. 

Remember, your rent payments can only help your credit score if they're reported to the credit bureaus. If you don’t report them, it's as though they never happened as far as your credit score is concerned.  

How Does Reporting Your Rent Affect Your Score? 

Renters can benefit from using Zenbase to help increase their credit history.

Understanding how reporting your rent payments affects your credit score is crucial. When you report your payments to the credit bureaus, it can either give your credit score a boost or bring it down, depending on how you manage them. 

Consistently paying your rent on time and having those payments properly reported can be a significant advantage for your credit score. It provides another way of building your credit history, which can cushion the impact of minor mistakes on your score. 

However, if you miss or are late with rent payments, it can have a negative impact on your credit score. This can make it tougher for you to qualify for credit in the future or even for renting another place to live. That's why Avenue Living Communities has teamed up with Zenbase to offer you an easy way to report your rent payments and split your monthly payments. 

With Zenbase, our residents can split their rent into two separate payments for the month, giving them flexibility and reducing the risk of missed payments. By using Zenbase’s services, you’ll have more control over your finances and the opportunity to improve your credit score.  

Learn more about Zenbase: HERE 

Why Building Credit Matters 

Building your credit can help benefit your future.

Building a credit score matters because it opens doors to numerous financial opportunities and enhances overall financial well-being. A prosperous credit score isn't just about making financial transactions; it impacts various aspects of daily life, empowering individuals to achieve their goals.  

Here are the benefits of cultivating a positive credit history: 

- Lower Interest Rates: Good credit can lead to lower interest rates on loans and credit cards. This means you'll pay less over time for the money you borrow, saving you money in the long run. 

- Access to More Credit Options: With good credit, you're more likely to be approved for a wider range of credit cards and loans, giving you more flexibility and options when managing your finances. 

- Higher Credit Limits: Lenders will typically offer you higher credit limits when you have good credit, which can be useful for managing expenses or emergencies. 

- Better Insurance Rates: Some insurance companies use credit scores to determine rates for auto or homeowner's insurance. With good credit, you may qualify for lower insurance premiums. 

- Easier Approval for Rental Housing: Property management companies often check credit scores when reviewing rental applications. Good credit can make it easier to get approved for rental housing. 

- Employment Opportunities: Some employers check credit reports as part of the hiring process, especially for positions that involve financial responsibility. Good credit can enhance your job prospects. 

- Utility Services: Some utility companies may require a credit check before providing services. Good credit can make it easier to establish utility accounts without having to pay a security deposit. 

- Negotiating Power: With good credit, you may have more leverage to negotiate terms on loans, credit cards and other financial products. 

Considering some recent changes in Canada, the government is proposing that renters can report their rent payments to credit bureaus. This is great news for residents because it gives them a chance to boost their credit scores. By understanding how credit works and learning about reporting rent payments, renters can now take control of their finances and set themselves up for a brighter future. 

by Avenue Living Communities