Canada has always managed to be a prime region for renting and housing. Considering that many people scour the perfect spot for house renting in Canada, it is important to stand out from the crowd. An individual can showcase this through many ways such as providing reference letters, rent receipt from your previous landlords and/or showing monthly payment receipts. But these measures are common. The best way to stand out is by showcasing your credit score for renting a house in Canada.
A strong credit score attracts the landlords and therefore, the process of renting becomes seamless. This is because any landlord is more likely to rent a property to someone with a higher credit score. So, this blog will take you through all the possible aspects related to credit score and its impact on house renting in Canada.
What is a Credit Score?
Credit score is a numerical figure that helps in analyzing how financially creditable an individual is which is calculated by your past credits and financial products. The range of credit score for an individual is normally between 300-900. It has a very simple rule to follow – the higher the credit score the higher are the chances for the landlords to get attracted.
It is similar to a financial institution. Like how your bank checks your credit score before giving you a loan or a credit card, similar is the case with lenders they will always check an individual’s credit score before finally approving their application. Its important to have a high credit for the purpose of purchasing or house renting in Canada.
There are many factors that together make an individual’s credit score, these include credit history, paying bills in time, the rate of credit utilization and the time period for which you have been carrying your credit products. A customer can also request to get their score from Canada’s credit bureaus directly. Also, it is considered important for a customer to check their credit score to understand what actually a landlord checks when renting you.
How is Credit Score Related to House Renting in Canada?
Why does a landlord check the credit score for house renting in Canada? How are renting and credit score related? Well, the answer is quite simple. Similar to how banks check a customer’s credit score before delivering them a credit card. This is because landlords are always looking for a tenant that they can trust and get assurance on timely rent payment. However, a customer can definitely provide their landlords with rent receipts for previous property and even provide them with reference letters.
For house renting in Canada, it is common for the landlords to conduct sitting for checking credit score on their potential customers. But they can only do this if the customer provides them with written permission. The reason behind the consent is that when a company for any landlord checks your credit score, it may appear as a hard inquiry and also have chances to impact the individual’s credit score on a temporary basis.
Also, a customer can check their credit scores with the help of TransUnion, Equifax, etc as these services do not affect their score. Other than this, if a landlord wishes to check a customer’s credit score, then they are required to be transparent about their inspection. As many landlords also provide the authorities with a separate set of documents that when signed by the authorities helps them to conduct a smooth check on their customers credit score. Many times landlords also include these requests as part of their rental application or their rental agreement. Therefore, always double check the document and read it carefully before signing.
Further, when the landlord gets the consent from the customer side then the landlord requests for a copy from Equifax and TransUnion . Sometimes the customers also involve the 3rd party that works specifically on checking the tenants background and checking their credit score.
Minimum Credit Score for House Renting in Canada
A landlord normally does not set any criteria for checking credit score for house renting in Canada. Therefore, it is tough to tell what is the correct score required for renting. But even then the credit score that is always recommended for a customer to maintain is 640 & above. These range of credit scores consist of fair, good and excellent. Whereas, in Canada, the ranges fall into 5 types starting from poor to excellent.
The breakdown of these range are as follows:
- Poor – 360 to 580
- Below Avg. – 580 to 640
- Fair: 640 to 700
- Good: 700 to 750
- Excellent: 750 to 850
In the year 2021, the average credit score for over 1 million members was somewhere around 660. Normally, a good credit score is considered to be 660 or even more. Although, if a customer’s credit score is below 660, then the customers are required to take appropriate steps to make sure that they are a potential candidate. When a landlord decides to check on your credit score, they analyze the credit report as a whole. Through this document, the following information can be examined:
First is to check your payments history specifically for your current account that you have opened and check whether or not the individual has made any late payments.
- Check whether the customer has any outstanding debts that include your credit balance as well as your loan (if any)
- The ratio of your debt with your income.This is because the landlords check if you earn 3 to 4 times higher than the rent price.
- Check whether you have accounts in various collections.
- Your public records, to check your bankruptcy (if any) and customer proposals.
The above mentioned points are some of the very important reasons for a customer to be always aware of its credit score and report. Where on one hand your credit score is a grade the credit report is a more detailed Version of your account. And so, Borrowell is one such entity that gives you a proper access to customers credit score as well as its credit report and once the customer checks both of them correctly they will understand what a landlord looks for in their potential customers.
Measures for Improving Your Credit Score
In case you do not have the accurate credit score and are wondering what measures you should take to improve the same, following are the steps that you can take:
Lowering Utilization Rate
The utilisation rate is one of the major factors that affect your credit score. It is the limit that users can use from the total rate of limit provided to them.
For instance, if you have a credit balance of say $500 and the limit on the other hand is $1,000 then your utilisation rate will be 50% but it is always recommended for you to keep the credit score below the utilisation rate say 30%.
Eliminate Errors on Your Credit Reports
While house renting in Canada, it is recommended that a user keeps a check on their credit report to ensure that there are no mistakes. This helps to keep them away from the unwanted errors. For instance, if a lender has accidentally added a note of late payment or any kind of bankruptcy under your name. In case you find any such mistakes, then it is recommended that you contact Equinox or TransUnion to file such mistakes and errors and that they remove the same from your credit report.
Never Close Your Old Accounts before Applying for a Rental
It is a misconception amongst the users that if they clear some of their loans and close their account in a short span of time that is right before applying for rentals then it can help them in increasing their credit score. Whereas, the situation is quite the opposite, taking these steps does not increase but rather reduces your chances of directing a higher credit score and credit report.
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Frequently Asked Questions (FAQs)
The average monthly cost of renting a house in Canada is $702.
You take the following steps to find a house to rent in Canada : ask a friend, check online, visit agencies, look for rent signs in your neighbourhood.
To pay the rent in Canada the landlords usually use the customers deposit to pay off their monthly rents.
For a foreigner to rent an apartment in Canada, the customer requires them to have a guarantor.
The minimum salary required to live in Canada is USD 40,000.