While there is no shame in renting, especially given current market conditions, many Canadians nonetheless aspire toward homeownership.
Owning property can be fulfilling personally and financially, but the road to homeownership is long and arduous for some.
One major hurdle is securing credit such as a mortgage, which is essential but demands a high credit score—something which many renters struggle to build, data shows.
It is estimated that more than three million people aged 18-plus in Canada are “credit invisible,” according to Equifax, meaning these individuals either do not have a credit file or the credit information on file is insufficient to generate credit scores.
An additional seven million may have two or less credit accounts on their credit file, which is considered limited credit history—a “thin” credit file.
Individuals that are credit invisible or have limited credit information on their file “may have difficulty accessing credit products and housing and may pay higher interest rates which can perpetuate a cycle of financial stress,” the company warned recently.
A markedly higher rate of credit invisible and credit-thin people rent versus own.
One solution for renters across Canada is now to report rent payments to showcase financial worthiness to credit bureaus.
“Rent is often the largest expense Canadians have each month,” observes 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 credit-worthiness.”
Several startups are at the forefront of “rent reporting” in Canada. Many also offer other features that aim to help renting Canadians gain a financial edge toward homeownership.
Below, we take a look at some recent innovation in the rental payment space.
Zenbase was founded with the vision of “becoming a trusted partner in managing household finances while eliminating late fees and predatory financing.”
This year, the Calgary-born firm is partnering with Mainstreet Equity to offer flexible rent payment options to residents across 16,500 units throughout Canada.
One of the primary features of Zenbase’s flexible platform is allowing users to split their rent into two payments, saving on stress and avoiding overdraft or late fees.
The startup also offers a fee-free cash advance service, which it says more than one-third of users have taken advantage of in order to cover utilities, groceries and gas.
“It’s expensive to be poor with late rent payments costing a resident as high as $150 each time,” laments Zenbase founder Koray Can Oztekin, who serves his company as CEO. “We are leveling the playing field by giving Canadians the flexibility that they need without getting penalized.”
According to Oztekin, it’s a winning situation for both residents and property managers.
Last year, Zenbase secured $4 million in seed funding in a round led by Global Founders Capital.
Launched in 2021, Chexy was the first Canadian payments experience that afforded tenants the possibility of paying home rent via plastic card.
Users get cash-back and other rewards from spending on a card—both on rent and at Chexy partner brands—while also building credit.
Split rents and other features are also available with minimal involvement from the landlord. Chexy pays the landlord his or her rent via e-transfer or deposit.
Chexy believes building credit through rent is an important step toward homeownership.
“By building credit, you increase your chances of qualifying for loans like mortgages and unlock better terms,” the company says.
Relying “on the backbone of your budget to continue to build credit” is an especially important feature as we all face economic headwinds, Chexy believes.
Chexy is participating in Intuit’s Prosperity Accelerator, a fintech-focused program in Toronto.
Billi Labs was created in BC in 2022 by a “team of financial experts, designers, and developers across Canada,” including chief executive Ty Sinclair and operating officer Dan Barton, who is based out of Victoria.
The digital platform launched by Bill Labs aims for Canadians to be “mindful” with their money. Users link financial cards and accounts to the encrypted app to gain an understanding of their transactions and manage their finances from a single interface.
Billi Labs aims to “effectively serve our members by helping them to understand where their money is, and where it’s likely to go, all while simultaneously building their credit using existing household bills, like their rent payment,” explains Sinclair.
Billi Boost enables renters to perform rent reporting in Canada.
“This is yet another tool in Billi’s kit to help realize our vision of bringing financial wellness to all Canadians,” the company says.
Founded in 2020, Toronto-based real estate platform Requity Homes operates a rent-to-own program that empowers Canadians to get one step closer to home ownership by allowing them to rent and save for their dream home with the option to purchase at a guaranteed price.
“With the rising cost of home ownership, it has become increasingly out of reach for many families,” said Amy Ding, CEO of Requity Homes. “At Requity Homes, we are offering a fair and flexible alternative path to home ownership by introducing more innovative financing options to an underserved market.”
Last year, Requity secured a seed financing round led by Boardwalk Investment with participation from Highline Beta, Conconi Growth Partners, and angel investors.
Leveraging underwriting technology, Requity Homes analyzes aspiring homebuyers’ future mortgage capability—providing a crucial steppingstone to homeownership for families that are not mortgage ready today due to credit history, lack of down payment, or self-employment.
“Requity Homes is a new innovative way to help Canadians reduce barriers to home ownership,” said Sam Kolias, President of Boardwalk Investment. “It allows investors to partner with home buyers, helping bridge the gap between renting and owning a home.”
Alongside Chexy, Requity will be Prospering in Toronto.
Borrowell has also launched a way for consumers to understand and build credit through simply paying their rent.
The Toronto-based financial technology firm’s program, Rent Advantage, enables tenants to report monthly home rent payments to Equifax.
A survey conducted by Borrowell found that among respondents with credit scores of under 660, 68% were renters, a stark difference compared to the Canadian average of 32% of households identifying as renters, according to Statistics Canada.
These stats motivate the Canadian fintech to empower renters, who should not be unnecessarily disadvantaged, according to the firm.
“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,” believes Borrowell cofounder Andrew Graham, who noted the program does not require involvement from a landlord.
Since 2018, renters have used FrontLobby’s program to build credit history in Canada.
The program allows renters to “establish an Equifax credit score based only on the reported rental information.”
Consumers may see an increase to their score as a result of reporting rent within six months.
A higher credit score “could result in potentially life-changing benefits for these consumers when applying for credit at pivotal moments such as applying for a mortgage, financing an education, or buying a car,” notes Equifax’s Kyriakatos.
Rent reporting carries individual and broader economic benefits, according to Zac Killam, the Vancouver-based entrepreneur who cofounded FrontLobby.
“FrontLobby is proud to have been a trailblazer with this solution for housing providers and renters to help deliver financial wellness, inclusion, and equal opportunity for all stakeholders in the rental community,” he stated in September.