How Does Rent Help Improve Your Credit Score?

Kredax Team

January 18, 2023

3 mins read

In the past, rent payments in Canada did not contribute to your credit score as our usual mortgage payments do. No matter how good of a rent-payer you were, it had no additional perks other than making your landlord happy. Fortunately, the plain field has been levelled between rent and mortgage payments, where your on-time rent payments can now contribute to improving your credit score.

Your credit score is one of the most important numbers in your life and should therefore be at its highest possible. Thanks to rent reporters like Kredax, your most likely largest monthly expense (your rent) can now contribute to improving your credit score. Read on to discover how having a positive rental payment history and reporting it to the credit bureaus can improve your credit score.

What Changes Does Rent Bring to Your Credit Score?

In other to understand how rent impacts your credit score, you first need to grasp how your credit score works. Five criteria impact your credit score. These are; payment history, total debt, credit history length, credit mix and new credit inquiries. Reporting your rent payments positively impacts all 5 of these accounts. Here is how;

Your payment history has the highest weight in the calculation at 35%. Therefore, this means just making your rent payments on time every month will have a big positive impact. It is important to note that, credit bureaus only consider payments to be late when they are over 30 days past due. This gives some extra room for your rent payments to be considered on time.
Your rent payment is not considered a loan, and therefore, does not increase your total debt.
Reporting your rent payments every month will positively impact the long run, as it will increase the length of your credit history. This is why you should start reporting it as soon as possible.
A distinct credit line is added to your credit report for your rent payment. This improves your file’s credit mix, which positively impacts your score.
No credit check is needed to report your rent payments to the credit bureaus, which therefore does not hurt your score as traditional hard credit requests do.

Your rent payments are not automatically reported to the credit bureaus unless your landlord or property manager directly reports them, which is usually not the case in Canada. In other to benefit from these on-time rent payments you make every month, you need to go through a rent reporter like Kredax.

How Does Rent Reporting Work?

Rent reporting is a process where your rent payments are reported every month to one or both of the credit bureaus, Equifax and Transunion. There are two ways for rent reporting to occur;

The first is when your landlord or property manager directly reports your rent payments themselves to the credit bureaus. Unfortunately, in Canada, most of them do not report rent automatically.
The second way is to sign up with a rent reporter like Kredax and have them do the rent reporting. Kredax has partnered with Equifax to enable tenants to report their rent payments. For a small monthly fee, Kredax then verifies your rent payments through electronic banking records and reports these to Equifax helping you boost your credit.

That being said, building your credit is not an overnight process and you shouldn’t trust anyone who says otherwise. It takes at least six months of positive reporting to see a change in your credit score.

Bottom Line

Likely, your rent payments are not being reported to the credit bureaus, since most landlords and property managers do not do the reporting. If you are a tenant who makes your rent payments on time and wants to improve your credit score, signing up for Kredax will be a smart decision for you to take full advantage of your rent.