Borrowell has launched a new program to help Canadian renters build credit history using their monthly rent payments.
Called Rent Advantage, the program will operate similarly to the way homeowners can build credit with their monthly mortgage payments, the company said.
Renters will sign up with Borrowell and connect the bank account they use to make their monthly payments. Payment history — a significant factor in determining credit score — will then be reported to Equifax Canada.
Subscribing to Rent Advantage will cost $5 per month, and users can cancel anytime without financial penalty. A landlord’s participation is not required.
“We want to make the credit system work better for underserved Canadians. This program was built with renters in mind and allows them to use payments they’re already making to build credit history so they may qualify for more financial products at better rates in the future,” said Andrew Graham, CEO and co-founder of Borrowell.
“Tenants who demonstrate good payment behaviour should be able to benefit from those actions, the same way a homeowner paying a mortgage would – it’s only fair.”
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In particular, Borrowell hopes the Rent Advantage program will benefit the 3.8 million Canadians who have a credit score of or below 660. According to Equifax Canada, a credit score below 669 is considered “fair,” while anything below 580 is “poor.”
A Borrowell survey of Canadians with credit scores below 660 found that 68% are renters; nationally, 32% of households identify as renters.
Aspiring homeowners can also benefit from Rent Advantage, the company said, as a credit score above 660 often leads to more competitive mortgage rates.
“Rent is often the largest expense Canadians have each month,” said Sandy Kyriakatos, Equifax Canada’s chief data officer.
“Recording payment history can give lenders a more accurate picture of a consumer so they can better understand the consumer’s creditworthiness.”
Rent Advantage will be available to select Borrowell members starting this month, and will be expanded to the public later this year. Interested renters can join the waitlist here.