National Post (Latest Edition)

PER­SONAL FI­NANCE

Cana­di­ans have op­tion to build credit score via rent pay­ments.

- Vic­tor Fer­reira Business · Credit Cards · Personal Finance · Banking · Toronto · United States of America · Equifax · Philadelphia Union

Eight years after Cana­di­ans first be­came able to use their mort­gage pay­ments to build their credit scores, a sim­i­lar op­tion now ex­ists for those who rent.

The Toronto- based Land­lord Credit Bureau, which is used by 30,000 land­lords and prop­erty man­agers across Canada and the U. S., is part­ner­ing with Equifax Inc. to cre­ate an on­line por­tal that tracks a ten­ant’s rent pay­ments so that the re­sult­ing data can be in­cor­po­rated into credit files. Ei­ther tenants or land­lords, who are tasked with up­dat­ing their tenants’ pro­files on a monthly ba­sis with on- time or missed pay­ments, can sign up to use the ser­vice.

The Land­lord Credit Bureau will be tasked with run­ning the por­tal, col­lect­ing the data and send­ing it to Equifax. Rent would then be treated in a sim­i­lar fash­ion to credit cards on credit files — a new trade line would be created and on- time or missed pay­ments would be­gin to weigh on credit scores.

Zachary Kil­lam, the CEO of the Land­lord Credit Bureau, said the con­tri­bu­tion of rent pay­ments to credit files and scores could sig­nif­i­cantly ben­e­fit two groups of Cana­di­ans who have tra­di­tion­ally strug­gled to es­tab­lish their cred­it­wor­thi­ness.

“I re­mem­ber when I first went to univer­sity and all I could get was a $ 300 credit card, which didn’t go far,” Kil­lam said. “New- to- credit and new- to- coun­try ( con­sumers) have thin credit files and they strug­gle to build their credit ratings so we see this as an op­por­tu­nity to flesh out their credit files with a large monthly pay­ment.”

The Land­lord Credit Bureau’s por­tal also aims to help land­lords. When they’re con­sid­er­ing a prospec­tive ten­ant, they would be able to pull that ten­ant’s pay­ment data, with per­mis­sion, and de­ter­mine whether there’s been a history of delin­quency.

While land­lords can cur­rently pull credit files with the con­sent of a rental ap­pli­cant, many still rely on ref­er­ences that can be more glow­ing that re­al­is­tic, Kil­lam said.

About 33 per cent of Cana­di­ans pay rent and that bill likely rep­re­sents their largest ex­pense, Kil­lam said, so it only makes sense that those pay­ments should be con­tribut­ing to a credit file. The logic may sound sim­ple, Kil­lam said, but the rea­son why credit agen­cies haven’t in­tro­duced this ear­lier is a bit more com­pli­cated.

Equifax Inc. di­rec­tor of con­sumer ad­vo­cacy Julie Kuzmic said there are sys­tem­atic lim­i­ta­tions that made in­cor­po­rat­ing rent pay­ments dif­fi­cult. Lenders and ser­vice providers that re­port to credit bureaus re­quire a cer­tain amount of data vol­ume to do so and they weren’t get­ting it. Mean­while, land­lords likely wouldn’t be able to “man­age the over­head re­quired to send the data to credit bureaus on a monthly ba­sis.”

A third party was al­ways go­ing to be needed, Kil­lam said. The U. S. credit bureaus that in­clude rent in credit files also work with a body like the Land­lord Credit Bureau, he said. With­out one, the larger credit bureaus would be re­spon­si­ble for ev­ery­thing from ver­i­fy­ing land­lords to set­tling dis­putes.

“The bureaus sim­ply didn’t want to deal with all the headaches and dif­fi­cul­ties as­so­ci­ated with the man­age­ment of land­lords and tenants,” Kil­lam said.

Go­ing for­ward, the new ini­tia­tive could par­tic­u­larly help younger Cana­di­ans qual­ify for mort­gages, Kuzmic said, but there are lim­i­ta­tions.

For one, hav­ing rent pay­ments on file doesn’t re­place the need of hav­ing credit card pay­ments con­tribut­ing to a score. Cana­di­ans who are wary of credit cards and only use them spar­ingly for the ne­ces­sity of build­ing a file or score can’t rely on rent pay­ments ex­clu­sively.

And it may not in­flu­ence all credit scores, she warns. Each Cana­dian has mul­ti­ple credit scores that are ac­ces­si­ble by dif­fer­ent lenders. Ac­cord­ing to Kil­lam, the banks ac­cess one that con­sumers can’t, for ex­am­ple, while Equifax, Fico and oth­ers may cal­cu­late their scores dif­fer­ently. There are still some, Kuzmic said, that don’t in­cor­po­rate mort­gage pay­ments. She ex­pects the same with oc­cur with rent pay­ments — they’ll be as­sim­i­lated into some scores but not into oth­ers. But even if it doesn’t af­fect a par­tic­u­lar score, hav­ing another trade line on file should au­to­mat­i­cally be more ben­e­fi­cial.

The bureaus didn’t want to deal with all the headaches.

 ?? Tami Chapell / REUTERS files ?? A part­ner­ship be­tween Equifax and the Land­lord Credit
Bureau will al­low renters to build their credit score.
Tami Chapell / REUTERS files A part­ner­ship be­tween Equifax and the Land­lord Credit Bureau will al­low renters to build their credit score.

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