April 18, 2024
The 2024 federal budget could have implications for Canadians’ credit scores. We look at three of the government’s proposals and how they could affect credit scores here.
The federal government recently unveiled the 2024 budget, setting out its goals for the next legislative year. There are a few proposals that could affect Canadian credit scores.
This includes potential changes for renters, creating a framework so fintech companies can create new tools to help Canadians track their spending and capping non-sufficient fund fees.
All of these changes, if implemented, have implications for Canadians’ credit scores.
These changes are merely proposed right now; they will be updated if and when they come into effect.
The government of Canada unveiled a proposed “renters’ bill of rights” as part of the 2024 budget. The proposed changes would impact renters across the country in a variety of different ways, including having paying rent count towards a person’s credit score.
The hope is that by tying rental payments to credit scores, it will help some Canadians get on the property ladder.
Credit scores are a key factor when it comes to being approved for a mortgage, so having rent and credit scores linked could be a bonus for those looking to leave the rental market.
The government says this would be a system that renters could opt into. It would not be mandatory. For those who have no issue paying on time, it could be an easy way to boost their credit score.
Those who struggle to pay their rent consistently should consider seeking professional help to address their underlying financial issues.
In short, maybe. For people who can save a large amount each month and never fail to pay their rent on time and in full, this could be a great way of improving their credit scores and getting approved for a mortgage.
But many critics of the government’s plan say the biggest obstacle to homeownership isn’t credit scores; it’s house prices. This proposal may help some, but those who can’t afford a downpayment will still be struggling.
Fintech companies are technology companies that provide services to the financial services industry. The budget notes that these companies have “been limited in their ability to develop new financial tools largely due to a reliance on unsecure screen scraping, which pulls data from a bank account by reading the account information. This requires Canadians to share their banking credentials with fintech companies.”
The federal government says it will introduce legislation to create what it calls “Canada's Consumer-Driven Banking Framework.”
“This framework will regulate access to financial data, providing Canadians and small businesses with safe and secure access to financial services and products that help them manage and improve their finances,” the government said in the budget.
The overall goal here is to eventually allow fintech companies to create new tools that help Canadians better understand their finances in a variety of areas.
Having a budget is the cornerstone to financial stability. These changes could lead to apps that allow you to keep track of bills and subscriptions, create a budget, and, in relation to what we previously discussed, track monthly rent payments to build up credit scores.
These tools could allow Canadians to budget better and help them pay their bills on time, which would improve people's credit scores.
We’re a long way from any of these potential tools seeing the light of day. The budget currently only looks at establishing “Canada’s Consumer-Driven Banking Framework,” which will provide access to financial data, providing Canadians and small businesses with safe and secure access to financial services and products that help them manage and improve their finances.
You are charged a non-sufficient fund fee (NSF) when you don't have enough funds available to cover a transaction. An example would be if you have a monthly pre-authorized bill, but forget to deposit money into your account to cover the charge.
The government wants to change the cap on these fees to only $10.
Currently, banks can charge fees closer to $50, which the government says disproportionately affects Canadians with lower incomes.
There are other changes for these fees that the government would like to implement as well, such as:
NSF fees can affect your credit score in an indirect way. An NSF fee itself doesn’t affect your credit score, but not having enough money in your account can mean missing a payment, which does.
Lowering these fees means Canadians would be able to avoid the negative repercussions of missed payments on their credit scores. With reduced NSF fees, you are less likely to face financial hurdles that lead to missed payments, late fees, and potential damage to your credit history.
If you’re someone who commonly incurs NSF fees, there are likely larger financial issues at play. Speaking to a Licensed Insolvency Trustee can help you address them and learn help you learn all of the pathways to becoming debt-free.
April 18, 2024
The 2024 federal budget could have implications for Canadians’ credit scores. We look at three of the government’s proposals and how they could affect credit scores here.
