1 week Ago By [email protected] (Srivindhya Kolluru)
Timely payments toward your loans, credit cards, lines of credit and mortgages is one of the main determinants of your credit score, a simple three-digit number that can be the difference between a thumbs up or thumbs down on a loan. Historically, however, one of Canadians’ largest expenses often didn’t contribute to building a credit score: rent. That has changed in recent years, and rent reporting tools and services have emerged to solve this problem.
Landlords and property managers can now use a platform like FrontLobby to report tenants’ rent payment history — with their consent — to credit bureaus such as Equifax and the Landlord Credit Bureau. This includes payments using cash, cheque, direct deposit or credit card. For property managers or landlords who don’t already pay for FrontLobby, there’s a tenant version of the service for $4 a month or $48 a year.
Renters can then invite their landlords to join and report their rent payments to build a credit history. According to their website , tenants have reported credit score jumps ranging from 36 to 84 points in the first six months of using the FrontLobby rent reporting tool. Experts say that rent-reporting services, and certain cashback offers when using a credit card to pay your rent, can be worth exploring — if the benefits outweigh the costs.
Financial services company Borrowell offers self-reporting of rent to Equifax for $8 a month for tenants who connect their bank account and provide rent details to the platform. Another company, Chexy, charges a 1.75 per cent monthly fee when you use a Visa or American Express credit card to pay rent, but offers cashback on those payments.
Beware, though, that some credit card companies treat those rent charges as cash advances, so you may incur additional interest charges depending on your credit card. Last year, Toronto-based fintech KOHO Financial began offering rent reporting through its cash account, allowing customers who are signed up for tenant insurance to earn 0.25 per cent cashback on rent.
Currently, the rent-reporting service is available to all customers, but only those who pay $19 a month for KOHO’s Everything Plan can earn cash back. If your landlord does accept credit cards, be sure to ask if any transaction fees will be passed on to you, and check with your credit card company to see if rent charged is considered a cash advance with immediate interest charges — which can pile up. “Say your rent is due today, but you’re not getting paid for another week.
Does it make sense to pay that fee just to transfer it to a credit card until you get paid? Then yes, definitely,” says Barry Choi, a personal finance expert. He recommends doing the math on how much cashback you would receive from a credit card, factoring in monthly or yearly fees, to see if these are worthwhile tools to use. Jason Heath, managing director at Objective Financial Partners in Toronto, advises being strategic about the credit card you use if you do enrol in a rent-reporting service.
“There might be an introductory annual fee zero per cent balance transfer offer,” he says. “Whenever you’re looking at any credit card incentive, you need to look at the corresponding costs, too.” Just be careful about using your credit card to pay rent and falling into a debt trap, which could ultimately hurt your credit score more than improve it.
There’s the risk, Heath says, that you could be hit with massive interest rate charges — which often range between 19 and 23 per cent — if you fall behind on your credit card payments. “The more you put through your credit card as opposed to through your bank account,” says Heath. “The more risk you have at the end of the month and you’re not able to pay that balance down.
”.
