Federal Government Proposes Tying Rent Payments to Credit Scores to Help Canadians Build Credit

The federal government has proposed a new way to help Canadians build their credit by tying rent payments to credit scores. This initiative aims to provide individuals with an opportunity to improve their creditworthiness through timely rent payments.

However, cost-of-living pressures are impacting some people’s ability to pay down debt and maintain good credit scores. A credit score is a crucial factor used by lenders to assess the risk of loaning money to individuals for various purposes, such as buying a car or a home.

Personal finance experts emphasize the importance of making payments on time and maintaining a low credit utilization ratio to protect or improve credit scores. A good credit score, typically above 650, can increase the chances of getting approved for loans and credit at favorable terms.

On the other hand, individuals with lower credit scores, considered “subprime,” may face challenges in accessing credit or may be offered higher interest rates. According to TransUnion, there are approximately 2.64 million Canadians classified as subprime borrowers.

Moreover, there is a group of individuals known as “credit invisible,” who lack sufficient credit history for lenders to calculate a credit score. This can pose challenges when seeking credit or loans, as lenders may be hesitant to lend without a credit history.

To address this issue, experts recommend starting with secondary lenders or secured credit cards to build credit history gradually. It’s essential to be patient and responsible with credit management to improve credit scores over time.

As Canadians consider the impact of their credit scores on future financial decisions, experts advise focusing on paying bills on time, maintaining a low credit utilization ratio, and being patient with the credit-building process. Ultimately, a good credit score can open doors to better financial opportunities and stability.