For many Canadian renters, owning a home in Canada is only a dream.
This is according to new research released by Canadian-based fintech company Borrowell.
The company sent out a survey to 1,500 members who rent to find out more about how long they had been renting and whether they would be in a better position now if they had built up their credit sooner.
The traditional way to improve your credit score is to build a credit history by having credit cards and making payments on time.
But tenants who have paid rent consistently over a long period of time often don't see anything showing up on their credit reports, Borrowell noted in the release.
The majority of renters surveyed said they have been renting for 11 years or more and pay between $1,000 and $2,000 per month.
Borrowell emphasized that these renters would have spent between $132,000 and $264,000 to pay rent if they hadn't built up credit.
“This amount represents more than 18 per cent of the down payment on the average Canadian home, which is $704,000,” Borrowell said.
Half of renters said their credit score is not good enough to get the mortgage they want, and more than half (51%) said they doubt they will be able to own a home in Canada.
The majority of renters (65%) say they would be in a better financial situation today if they had started building credit earlier.
90% of respondents agreed that it is harder for renters to buy a first home than their parents' generation.
Your credit score not only affects whether you qualify for a mortgage, but it also impacts the type of mortgage you can get.
It can also affect the size of a down payment a lender requires, which in turn determines whether you’ll have to pay private mortgage insurance (PMI) and, if so, how much you’ll have to pay.
According to Loans Canada, the minimum credit score you need to get a mortgage in 2024 is between 620 and 680, depending on the lender.
To address the issue of renters' credit scores, the Federal Government introduced a Renters Bill of Rights as part of the 2024 Budget.
The Bill of Rights aims to help young people get a foothold in the housing market, and one of its key action items is to ensure credit reporting agencies take rent payments into account when calculating an individual's credit score, so that more Canadians can qualify for mortgages.
For Canadian renters looking to improve their credit scores, Borrowell offers a rent reporting tool called Rent Advantage that allows renters to share the past 24 months of rent payments with Equifax so they don't have to rely on their landlord.
From the files of Isabel Doct
