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Renting with bad credit, bankruptcy, or bad debt in Canada

18 October 2022

Joshua Harris

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Key Points

How does a bad credit score affect your ability to rent in Canada?

Nobody wants to be in debt, but life gets in the way sometimes and these things happen. No matter how uncontrollable debt creeps up on you, it can have a lasting effect when you come to rent a property. Bad credit, debt and bankruptcy all negatively affect your credit score, therefore impacting your ability to be accepted into a tenancy. Let’s explore the potential pitfalls of trying to rent when your credit rating isn’t the best.

Can you rent with bad credit?

Yes, you can, but your options may be more limited than those not currently experiencing financial hardship. In order to understand why you need to try and look at it from the point of view of your potential landlord…

In order to secure tenancy, a credit check is usually performed. This is to determine whether you are fiscally responsible and pay your bills on time. Any ‘red flags’ attributed to you will be shown on this credit report. These can include missed bill payments, excessive debts, consumer proposals, debt restructuring agreements, and bankruptcy proceedings.

If you were a landlord and your potential tenant had numerous ‘red flags’ on their credit report, would you trust them enough to make the monthly rent payments on your property despite all the evidence to the contrary? Probably not. And herein lies the problem.

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How can I rent a house with bad credit?

But don’t despair just yet – there are a few workarounds so that renting with bad credit is still a possibility.

1. Enlist the help of a guarantor

A guarantor is someone who says that they will assume the risk that you pose and pay any rent that is owed if you are unable to. Many landlords are happy with this arrangement as it means the risk of them losing money is diluted.

2. Provide alternative proof that you are trustworthy

This could either take the form of a character reference from someone you know who is considered of high standing in society (a teacher, a doctor etc) or if you have rented before, a letter from your old landlord stating that you always paid on-time.

3. House share

Living with others will cut your outgoings down dramatically, making you more able to afford to rent a home.

4. Pay upfront

If you are having financial issues then this option may not be available to you. Some landlords will overlook the results of a credit check if you can pay a few months upfront as this will minimize their risk.

5. Be honest

If you know that your credit report will not read favorably, you could always tell your potential landlord your situation. This is, admittedly, a long shot, but it has been known to work.

None of these methods are foolproof, but they are options to consider if you have debt, bankruptcy, or bad credit that may be stopping you from finding a suitable rental property.

How you can improve your credit rating quickly

Here are a few quick fixes that you can do to give your credit score a bump if you are thinking of applying for tenancy.

1. Check your credit score

You can get a free credit score report from the big credit reporting agencies once a year. Go through it with a fine tooth comb and contact them to remove any errors.

2. Be smart with your credit cards

Wherever possible try to keep your credit card utilization under 30% of the available credit. Any more than and it looks as though you are dependent upon them to get by.

3. Raise your credit limit

This may seem counterintuitive, but by asking for a higher credit limit (and then not spending it), will instantly bring your credit utilization down.

4. Keep long-standing accounts running

Keeping long-running credit accounts, such as your cellphone provider, provides historical proof of you paying your bills consistently.

How you can improve your credit rating quickly

If you are having trouble with your debts or your credit score is holding you back, then speak to our Licensed Insolvency Trustees. They’ll be able to advise you of the best course of action to resolve your debt issues so that renting with bad credit becomes a thing of the past and you can apply to rent without fear of rejection or complications.

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Joshua Harris

Joshua Harris - BComm, MIB, CIRP, LIT

Partner, Licensed Insolvency Trustee at Harris & Partners Inc.

Joshua Harris is a Licensed Insolvency Trustee and Partner at Harris & Partners Inc. With a strong background in financial restructuring, Joshua has been instrumental...