If there’s one misconception about landlords, it’s that they’re rich. While many do eventually make the ascension from mortal and mogul, most real estate investors own, or are still paying off, a relatively small assemblage of residential properties. With cap rates shrinking across the country, many of these investors are grateful to reach month-end without an unforeseen maintenance emergency wiping out the few hundred dollars in cash flow they rely on to make their investments worthwhile.
Until now, credit scores have only acted as a roadblock in the renting process — a test would-be tenants have to pass in order to convince landlords they’re trustworthy. But a new initiative from the Toronto-based Landlord Credit Bureau (LCB) is promising to make renting an essential part of building up your credit score.
When Zachary Killam was a renter years ago, he found it strange that all his rent payments counted for nothing on his credit score. “When I moved into my first place, I had a $300 credit card limit. I paid my rent on time, but it always struck me: Why isn’t my rent ― which is of course my largest expense each month ― not on my credit record? I have a credit record for my phone bill but not my rent.”
Eight years after Canadians first became able to use their mortgage payments to build their credit scores, a similar option now exists for those who rent. The Toronto-based Landlord Credit Bureau, which is used by 30,000 landlords and property managers across Canada and the U.S., is partnering with Equifax Inc. to create an online portal that tracks a tenant’s rent payments so that the resulting data can be incorporated into credit files. Either tenants or landlords, who are tasked with updating their tenants’ profiles on a monthly basis with on-time or missed payments, can sign up to use the service.