Your monthly rent payment can go beyond just keeping a roof over your head, it can be tapped for potential benefits such as improving your credit score or earning cash-back rewards. But experts say these financial tools should be used wisely.
Rent reporting can be facilitated by your landlord, or you can sign up with a number of companies offering to report your monthly payments to credit bureaus. Each time you pay rent, you can potentially increase your credit score. There are also opportunities to earn cash back on rent payments, either through credit cards or special programs.
Rent reporting can be “incredibly practical, incredibly helpful” for people who are building credit, said Shannon Terrell, spokesperson for NerdWallet Canada.
But it’s best suited for someone who is financially secure, she added.
“If you are someone who potentially struggles to make those rent payments in a timely fashion, maybe rent reporting is not the ideal route for you at this time,” Terrell said.
A payment that is slightly late shouldn’t ding your score though, said Eva Wong, co-founder and chief operating officer of Borrowell. The fintech company focuses on money management tools, including credit monitoring and options to improve your credit rating.
“What matters is that you made the [rent] payment, right?” Wong said. “Most lenders give a 30-day grace period for paying any bills. So as long as the person is coming back and saying, ‘Yes, I did pay my October rent, and this is what it was,’ usually lenders don’t report something late unless it’s more than 30 days.”
Borrowell launched its rent-reporting tool in 2022, which doesn’t require a landlord’s involvement. Renters can either connect their accounts to Borrowell or upload financial documents from their bank — even if it’s just screen grabs of the rent payment coming out. They also require a lease document.
For a quick credit score boost, Borrowell also offers a tool that can report up to 24 months of rent payments made in the past, for a one-time fee. The company will refund this fee if users don’t see their score increase.
“They can be large increases, especially for people who are new to credit and don’t have a lot of credit history, or have a lower credit score,” Wong said. “Obviously, the higher your credit score, the less room there is to go.”
For users with a score below 700, about 70 per cent saw their rating improve, Wong added. The average boost was 27 points among that group.
Chexy, Zenbase, FrontLobby and City Lending Centers are a handful of other companies with credit-reporting tools; some also offer rent-splitting with roommates or breaking down rent payments into smaller chunks.