Canada’s New Housing Plan: Linking Rental Payment History and Credit Scores

The federal government’s new Housing Plan, announced on April 12, 2024 and supported by Budget 2024, introduced a provision aimed at helping renters build credit by integrating rent payments into credit histories. It proposes amendments to the Mortgage Charter, encouraging collaboration among fintech companies, credit bureaus, and lenders to include rental payment data in credit scores. 

The government calls on these agencies to create an ecosystem where renters can choose to include their rental payment history in their credit scores. It also expects lenders to prioritize comprehensive credit information, including rental payment history, in credit evaluations whenever feasible. 

The budget introduces Canada’s Framework for Consumer-Driven Banking, with a goal of enabling Canadian financial consumers to securely transfer their financial data and facilitating the integration of rental payment data into credit evaluations.

Who This Could Help

Currently, many Canadian renters face challenges in demonstrating their creditworthiness when applying for mortgages or undergoing credit evaluations, despite regularly paying high amounts of rent. This change could help these renters build credit and, with good credit, access better mortgages. Young individuals, newcomers, others with limited credit histories may benefit. 

Equifax is investigating how rent payments could be factored into credit scores, and testing use of rent data. An Equifax study suggests that including rental payment data could help improve or build credit scores for around five million Canadians.

Who This Could Create Difficulties For

Some groups have expressed concern that including rent payments in credit ratings could hurt lower-income brackets who are struggling with unaffordable housing. 

According to the January 2024 CMHC Rental Market Report, Canada has been facing persistent rental demand surpassing supply for the second year in a row. Major markets face record-low vacancy rates (1.5%) and record-high rent growth (8.0%), intensifying rental competition. Toronto, Montréal, Calgary, and Edmonton all witnessed significant vacancy rate declines. Rent increases are significant, particularly in Calgary and Edmonton, and the widening gap between rent and wage growth poses challenges to affordability nationwide. Lower-income renters, in particular, encounter below-average vacancy rates for more affordable units, exacerbating the affordability crisis. These conditions not only make securing affordable rental accommodations increasingly difficult, as demand outpaces supply, and rental costs continue to rise, but it also means that some renters that may be struggling to manage the increasing payments could start to have their credit negatively impacted.

However, the Housing Plan does mention the plan will “give renters the option to include their rental payment history in their credit scores, helping renters qualify for a mortgage and better rates.”

The Canadian Centre For Housing Rights has released a statement that it is pleased to see the government introduce new rules to allow renters to decide if they would like their rental payment history to be taken into account for their credit score. This opt-in approach will help ensure that renters who are struggling to pay their rent on time due to the mounting housing affordability crisis are not negatively impacted.

Joanna Gerber