Might I need a credit score to rent, or for any other non-borrowing finances?

Question

I'm moving to Canada soon, and I've read that some people use credit cards for the sole purpose of building up a credit score that they might need. Personally, I consider a system requiring this rather odd (borrowing and paying back money for the sole purpose of showing one can, even if one wouldn't need to borrow money in the first place?!). I'm not planning on borrowing any money, so hopefully it's not relevant for me... However, in Sweden, if one borrows money and doesn't pay it back, one gets on a blacklist that will make it difficult to rent an apartment. Hence my question:

If I never borrow any money¹ but always pay from the money I already have, and consequently have no credit score, might this affect my ability to rent a residence? Does it affect any other financial transaction that do not involve borrowing money? If yes, how can I resolve this?

Rationally, showing significant income and savings should be sufficient to convince landlords that I can pay my rent. Alas, institutions do not always act rationally, and being an outlier by never having debt may be bad enough.

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¹I did have a 3000€ study debt, but I paid it off within three months of getting my first job in 2009, and this anyway won't be known internationally.

Answer 1

Credit scores are not such a big deal in Canada as they are in the US and even some European countries. One reason for this: the Social Insurance Number (SIN number) isn't used for so many purposes like the Social Security Number (SSN) in the US.

The SIN number isn't even required to get credit (but with some exceptions it is needed to open an interest-bearing savings account, so that the interest income can be reported). You can refuse to provide the SIN number to most private companies.

Canada also has one of the highest per-capita immigration rates of any large country, so new arrivals are expected, and services are geared up for them. Most of the banks offer special deals for "New Canadians". You should get a credit card (even if just a secured credit card) through them with one of these offers to start a credit file anyway, but there's no need to actually use it much. Auto-paying a utility bill through the card, and paying it off in full each month, is one way to keep it active. No need to ever pay any interest.

Most major apartment rental firms will expect a good proportion of their renters to be new to Canada, so should have procedures in place to deal with it (such as a higher deposit). You should not give them your SIN for a credit check, even when you're more established. Same for utilities, they can just charge a higher deposit if they can't credit check you. For private landlords, everything is negotiable (but see the laws link at the end of this answer).

You will later need a credit rating for a mortgage on a house (if not paying cash), so it's worth getting that one token credit card. Useful for car rental also.

Here's a fairly complete summary of the laws on renting in Canada, which includes the maximum deposits that can be asked for, and notice periods.

Answer 2

Alas, institutions do not always act rationally, and being an outlier by never having debt may be bad enough.

Therein is your problem. The question, then, is do you want to do business with institutions that are not acting rationally?

While I cannot specifically speak to Canadian business practices, I have to imagine that in terms of credit history as a prerequisite to a lease, it can't be too different than America.

It is possible to live without a credit score. This is typically done by those with enough resources that do not need to borrow money. To make transactions that commonly use credit scores, such as a lease, they will provide personal financial statements (balance sheets, personal income statements, bank statements, pay stubs, tax returns, etc...) to show that they are credit-worthy. References from prior landlords may also be beneficial.

Again, the caveat is to elect to only conduct business with those individuals and institutions that are intelligent and rational enough to be able to analyze your financial position (and ability to pay) without a credit score.

Therefore, you'll probably have better luck working with individual landlords, as opposed to corporate-owned rental complexes.

Answer 3

Typically one wants to see a credit score, just because you may have money in the bank and decent income does not mean your going to pay, there are plenty of people who have the money but simply refuse to cough it up. Credit is simply a relative way of seeing where one fits against another in a larger group, it shows that this person not only can pay, but does pay.

While not having a credit history should make no difference, I can and hopefully easily posited above why it can be necessary to have one. Not all landlords will require a credit check, I was not required to give one, I did not have much credit to begin with, given that, I was forced to cough up a higher degree of a security deposit.