Why Credit History is Important When Renting a Home in Canada
This article is part of our ongoing series on moving to Canada and how to rent a home when you arrive in the country. The series includes the following articles:
- Article 1: Renting an Apartment in Canada | Essential Tips
- Article 2: Renting an Apartment Within Your Budget
- Article 3: Why Credit History is Important When You Rent a Home in Canada
- Article 4: Understanding the Basics of Your Rental Agreement
- Article 5: 5 Moving Costs You May Not Know About
Why Credit History is Important When You Rent a Home in Canada
Your credit history is a record of your reliability when it comes to paying back debt. Whenever you ask for a loan such as a mortgage, the lender will want to see your credit history. This is because your credit history will tell the lender how reliable you are. The better your credit history, the more reliable you are in paying back debts. Therefore, lenders will want to give loans to people who have a good credit history.
Credit history is determined by your credit score which can range anywhere from 300 to 900. The higher your credit score, the better, as that would mean you have a good record of paying back debts. Having a good credit score has many benefits. Some benefits include lower insurance rates, lower interest rates on your credit card and easier access to large loans. Another huge benefit of having a good credit score, as you are about to see, is looking for a rental home. Learn more about Building Credit History in Canada.
Why is Your Credit History Important?
Your credit history is one of the things landlords want to see before giving out their home to you. Your credit history will tell the landlord how reliable you are when it comes to paying back debt on time. A good credit score will tell the landlord that you are a reliable person and you will likely pay your rent on time. Landlords don’t want tenants who don’t pay the rent on time and want to give out their house to someone reliable. In summary, credit scores tell landlords who to rent the home out to and who to avoid.
While this arrangement is great for landlords, it can be problematic for newcomers who are looking to rent a home. If you are a newcomer to Canada, you likely will not have a credit history. It takes a minimum of six months to generate your first credit score. Because of this, it can often be hard to convince a landlord that you will be a reliable tenant. However, there are some tips that you can follow to rent a home without a credit history.
How Do I Rent a Home Without a Credit History?
The first thing you can do is show proof to your future landlord that you have a good amount of savings in your bank account. This will tell the landlord that you have enough money to pay the rent and probably will pay it on time.
If you don’t have a good amount of savings, your top priority would probably be to secure a source of income. Once you have done that, you can show proof of income to your landlord. This will also satisfy landlords because it means that you have enough money coming in every month to pay the rent.
There is also another way to get a house on rent without a credit history. Some landlords openly accept newcomers and reserve their homes, especially for newcomers. These rentals may be small and less than ideal. However, they are a good option if you need a place to stay while you build your credit score. Many times, these rental homes have basic furniture like beds and sofas which makes it easier for newcomers to move into.
In the meantime, paying your bills on time and being reliable with all of your payments is a great way to show lenders that you are financially responsible. And over time, you will build a strong credit history that can provide you with many benefits.