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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 will 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.