Assessing Creditworthiness in My Village, Versus Assessing Creditworthiness in a City

In many villages, small communities, and neighbourhoods, people give each other credit based on character and the relationships they have built with each other. This is true today, but much more so in the past. Giving credit based on character and relationships worked quite well in such communities because people knew each other at a personal level.

However, as communities grew and villages became towns and cities, lenders could no longer maintain personal relationships with all their customers. They could not rely on those relationships to reliably assess creditworthiness. In the city, character and personal relationships were not deep enough to determine whether someone could be trusted.

The Birth of Credit Scores

It became necessary to create alternative, measurable ways of assessing creditworthiness. Experts in the credit industry designed a system where lenders could analyse someone's borrowing and repayment history to determine whether they were responsible and could pay back what they owed. This was the beginning of credit histories, credit scores, and the commonly used FICO scores in Canada.

This was an efficient method — but only for people who used formal financial services, since only formal institutions could track that type of data. Those without a history of using formal financial institutions remained invisible to lenders.

The Scale of the Problem

Over 6 million Canadians are currently credit invisible, meaning there is no data on file with Canada's main credit bureaus, Equifax and TransUnion, to determine their creditworthiness. In addition, hundreds of thousands of international students, professionals on work visas, and newcomers to Canada do not have a Canadian credit history.

Simply put: no credit history means no credit score. These people are still invisible to formal financial institutions — not trusted, not served.

Rent: The Missing Data

Today, we have the opportunity to improve this situation. Even without using formal financial institutions, these people pay rent to landlords and property managers every month. It is estimated that 9.8 million Canadians spend an average of $1,567 per month — over $15.4 billion per year — on rent, their largest monthly household expenditure.

Yet historically, rental payment data has not been incorporated into consumer credit algorithms, creating a fundamental disparity between homeowners and renters:

• Homeowners build credit by making mortgage payments — this data is reported to credit bureaus automatically.
• Renters receive no credit benefit for making on-time rent payments — this data has never been reported.

The result: renters are penalised simply for renting.

The Credisys Solution

Credisys is now able to report monthly rental payments to credit bureaus. This helps tenants build their credit history and boost their credit scores — without taking on new debt.

Credisys captures and reports tenants' rental payment data to Equifax and TransUnion, potentially connecting millions of Canadian tenants to the credit system for the first time.

Why Does Credit Matter Anyway?

A healthy credit score plays a major role in your overall financial wellness. A better credit score helps with:

• Credit card applications
• Car purchases and auto loans
• Home purchases and mortgages
• Private student loans
• Better interest rates on all of the above

Credit also impacts your ability to get:

• A phone plan or utilities account
• Approval to rent an apartment
• Certain jobs

With Credisys reporting tenants' rental payment data to credit bureaus, everyone wins.