It is estimated that more than three million people aged 18-plus in Canada are “credit invisible,” according to Equifax, one of the largest consumer credit reporting agencies.
Being credit invisible means these individuals either do not have a credit file or the credit information on file is insufficient to generate credit scores, which can make life challenging. An additional seven million may have two or less credit accounts on their credit file, which is considered limited credit history—a “thin” credit file, according to Equifax.
Individuals that are credit invisible or have limited credit information on their file “may have difficulty accessing credit products and housing and may pay higher interest rates which can perpetuate a cycle of financial stress,” the company warns.
That is the reason behind the rent-reporting program Equifax launched in collaboration with Vancouver-born FrontLobby. Since 2018, renters have used the program to build credit history in Canada.
According to findings by Equifax Canada looking at a subset of consumers who use the FrontLobby platform, 48% of the renters who reported through this platform “are currently scoreable based solely on the rental data reported into Equifax.”
“By reporting rent information to Equifax with FrontLobby, 48% of these renters were able to establish an Equifax credit score based only on the reported rental information,” said Sandy Kyriakatos, chief data officer for Equifax. “When renters can provide a clear rent payment history, lenders may be better able to evaluate a consumer’s financial opportunities.”
The study showed that consumers may see an increase to their credit score as a result of reporting rent through FrontLobby and that this can happen within the first six months.
A higher credit score “could result in potentially life-changing benefits for these consumers when applying for credit at pivotal moments such as applying for a mortgage, financing an education, or buying a car,” notes Kyriakatos.
Rent reporting carries individual and broader economic benefits, according to Zac Killam, a Vancouver-based entrepreneur who cofounded FrontLobby.
“FrontLobby is proud to have been a trailblazer with this solution for housing providers and renters to help deliver financial wellness, inclusion, and equal opportunity for all stakeholders in the rental community,” he stated.
Other companies in this space include Toronto’s Borrowell, whose recently launched Rent Advantage program also enables tenants to report monthly home rent payments to Equifax.
Calgary’s Zenbase is in the business of flexible rental payments while Toronto’s Requity Homes operates a rent-to-own program that empowers Canadians to get one step closer to home ownership by allowing them to rent and save for their dream home with the option to purchase at a guaranteed price.
In BC, RentMoola’s technology allows for simple, flexible, and transparent transactions between tenants and property management— furthering its mission to empower individuals to take control over their finances. Another Vancouver fintech startup, liv.rent, allows tenants to pay their rent with cryptocurrency while the landlord receives fiat currency. Meanwhile, Tribe and Apollo have modernized insurance for renters.