Difference Between Equifax vs TransUnion Credit Reports in Tenant Screening

As a housing provider (or landlord) who’s been through the wringer with tenants who don’t pay rent, I can’t stress enough how crucial it is to understand Equifax and TransUnion. I’ve also witnessed first-hand when bad actor tenants don’t pay rent because Openroom has thousands of these landlord and tenant dispute court orders.

These credit bureaus are your secret weapons in the tenant screening process and believe me, you’ll want to use them.

Having invested countless hours studying Ontario’s rental laws and engaging with numerous small-scale landlords, I’ve come to realize that selecting the appropriate credit report is crucial for the success of your rental business. I assure you, the minimal cost of obtaining these reports pales in comparison to the challenges of managing problematic tenants.

Now, let’s examine the specifics of Equifax and TransUnion, how these credit bureaus calculate credit scores and how they can protect you from financial losses and stress.

What are Equifax and TransUnion?

Equifax vs. TransUnion? This is such a common question that people ask. They are the two main credit reporting agencies in Canada that hold credit score and credit history about a consumer. They are the only two credit bureaus that are recognized by the Canadian Government on their website, officially. In the USA, there's a third one called Esperian.

For the purposes of the Canadian rental market, I'll focus on discussing the differences of Equifax and TransUnion.

Overview of credit bureaus in Canada

In Canada, we’ve got two main players in the credit bureau game: Equifax and TransUnion, the major consumer credit bureaus. These aren’t just fancy names; they’re the gatekeepers of financial information that can make or break your decision on a potential tenant. I’ve learned the hard way that not all tenants are created equal, and these bureaus are your first line of defense.

Both Equifax and TransUnion collect and maintain credit information on individuals. They gather data from various sources like banks, credit card companies, and other lenders. This information forms the basis of credit reports and credit scores, which are essential tools in assessing a person’s creditworthiness.

Key differences between Equifax and TransUnion

Now, you might be wondering, “If they both do the same thing, why do we need two?” Well, let me tell you, there are some key differences that can impact your tenant screening process. Equifax and TransUnion may collect information from different sources, which means their reports and credit scores can vary.

For instance, Equifax might have information from a particular lender that TransUnion doesn’t, or vice versa. This is why I always recommend checking both credit reports when screening tenants. You don’t want to miss out on crucial credit information that could save you from a potential headache down the line.

Another difference lies in their credit scoring models. While both use a range of 300-900 for credit scores, the algorithms they use to calculate these scores can differ. This means a tenant’s credit score might not be identical on both reports. As a landlord, it’s important to understand these nuances to make an informed decision, because tenants can have multiple credit scores that vary between reports.

The Importance of Credit Reports in Tenant Screening

In the past, I couldn’t believe that I skipped the pull of the Equifax and TransUnion credit reporting to save $20. Since knowing about them, I never missed pulling at least one.

Your credit history isn’t just about getting approved for a new credit card. It’s a snapshot of someone’s financial reliability that can impact various aspects of their life.

Here are two reasons why it’s so important:

#1: Credit Scores Can Affect Finances

Financial institutions don’t just glance at your credit report and score - they scrutinize them, including recent credit inquiries. These numbers are pivotal in determining whether they’ll get that loan or mortgage, and at what interest rate.

A solid credit history can be your ticket to better loan terms and lower interest rates, potentially saving you thousands over time. On the flip side, a poor credit history or no credit history at all can make borrowing money a real challenge, often leading to higher interest rates or outright rejections.

#2: Credit report can affect next housing and/or employment prospects

Second, as a landlord, I always check credit histories. A poor credit score, influenced by the management of credit accounts, can make renting a property an uphill battle. Some employers also look at credit reports, especially for positions involving financial responsibilities.

What information credit reports provide

Credit reports from major credit bureaus like TransUnion and Equifax, are packed with valuable information that can help you make informed decisions about potential tenants. They typically include a person’s credit score, which is a quick snapshot of their creditworthiness. But don’t stop there - dig deeper into the details.

These credit reports also show payment history on personal loans, credit cards, and other financial obligations. If you see a pattern of late payments or defaults, it might be a red flag. Credit reports can also reveal any bankruptcies, foreclosures, or collections - all crucial information when you’re considering entrusting someone with your property.

Another key piece of information you’ll find is the individual’s credit utilization ratio. This shows how much of their available credit they’re using. High utilization could indicate financial stress, which might affect their ability to pay rent consistently. Remember, all these details paint a picture of the potential tenant’s financial responsibility - a crucial factor in your decision-making process.

Watch Co-Founder Weiting's mistakes for not using a credit bureau to assess a renter

Equifax Reports for Tenant Screening

When it comes to tenant screening, credit reports, including the Equifax credit score, are a goldmine of information. As a landlord who’s been burned before, I can’t stress enough how crucial these reports are. They’ve saved me from potential disasters more times than I can count.

Story of a Fellow Landlord

XL wrote into Openroom on her regrets of not doing proper due diligence checks on her Tenants.

Hi Weiting,

My name is XL. We probably speak the same language judging by your first name. Given that you might be receiving thousands of emails every day, if you happen to see this one, here is my story.

The tenant, YH, has just been evicted and left with unpaid rent of over $15,000, plus water-damaged wood flooring and damaged appliances (another couple of thousand to replace them all).

It all started in 2021 when the original tenant, Vikram, moved in. He is a Canadian citizen with a company and family; he seemed like the perfect candidate. I accepted the offer, and everything seemed well. However, I did have some doubts at the time: why would a local guy with a company in Richmond Hill earning $100,000 a year choose to live in Markham by himself in a one-bedroom condo unit?

The answer became clear not long after he moved in. One day, he requested to add a girl named YH to the lease agreement, claiming she was his girlfriend and needed it for a common law application. A man in his 40s sponsoring a young girl isn’t very uncommon, I thought. I accepted the request without looking into her background, which turned out to be my first lesson learned.

Another strange sign emerged as soon as YH moved in: she started to EMT the rent to me instead of Vikram. I immediately suspected that there must be some sort of deal between them, possibly involving immigration fraud (fake marriage sponsorship).

Around that time, my parents came to visit and needed a place to stay. I asked Vikram and YH if they could vacate the unit, with compensation, of course, so my parents could live there. Vikram proposed increasing the rent from $1,750 to $2,250 so my parents could live somewhere else. I found a place for my parents for $2,500 a month but was only receiving $2,250 a month from the tenants. This decision was made to save them some hassle, which turned out to be my second lesson learned.

Shortly after this exchange, Vikram sent over an N9 to be released from the lease, leaving YH to become the sole tenant. I signed it without hesitation. Third lesson learned.

Almost immediately after he left, YH stopped paying rent, starting in September 2023 and continuing until the day she was evicted in July 2024.

I totally understand what you have been through in your case. I was lost and frustrated, and I doubted myself and hated myself for being too ‘generous,’ and, of course, too ignorant.

Nonetheless, she is gone. Before she was evicted, she told me something about her relationship with Vikram. They never intended to apply for common law; Vikram is married and just liked her. So, I assume he rented the place for her, they lived together for some time or none at all, and when they broke up, she needed to be added to the lease to continue staying.

She is gone for good, back to Taiwan, and I have no trace of where she went. So, I contacted Vikram recently to seek a voluntary resolution and warned him that I might hire a company or individuals to go after YH and him, even though he was not on the order.

I know that in Canada, not many companies, if any at all, would take this case, as it is highly regulated. So, I don’t hold my hope up this time. This is just my story. Thank you for what you and your team are doing. The Canadian rental system is a mess, and the government’s inaction and incompetence have left many landlords like me without justice.

Best regards,

XL

Unique features of Equifax reports

Equifax credit scores have some standout features that make them invaluable for tenant screening. One of the most significant is their inclusion of rent-related tradelines and collections regarding residential rentals. This is huge for us landlords because it gives us insight into a potential tenant’s rent payment history.

Unlike TransUnion score, Equifax accepts and reports on rent payments. This means you can see if a prospective tenant has a history of non-payment rent payments or if they’ve ever been sent to collections for unpaid rent. Trust me, this information is pure gold when you’re trying to avoid problem tenants.

As of August 2024, Openroom has launched Rental Debt Ledger for the public and is now accepting court orders in Ontario with rental debt owing to be reported to Equifax.

Pros and cons for landlords

The biggest pro of using the Equifax score is undoubtedly the rent payment information. It’s like having a crystal ball that shows you how reliable a tenant might be with their rent. This feature alone has saved me from potentially disastrous situations with tenants who looked great on paper but had a sketchy rent payment history.

Another advantage is the depth of credit information Equifax provides. Their credit report typically include a comprehensive credit history, which can give you a clear picture of how financially responsible a potential tenant is. This goes beyond just rent payments and can help you gauge their overall financial stability.

However, it’s not all roses. One potential downside is that Equifax score might not be as up-to-date as we’d like. Credit information can sometimes lag, which means you might not always have the most current data. Also, while the rent payment information is incredibly valuable, it’s not universal. Not all landlords report to Equifax, so you might not always find this information for every applicant.

Sometimes, you might even need a private investigator to look into an applicant to ensure they are 100% truthful. Openroom works with partner experts and you can get a free consultation if you want to - no pressure!

Which Credit Report Should Landlords Choose: Equifax or TransUnion?

As a landlord who's been through the wringer, I can't stress enough how crucial it is to choose the right credit report for tenant screening. After losing $35K+ from non-paying tenants, I've learned that this decision can make or break your rental business.

Factors to consider when deciding

When it comes to choosing between Equifax credit score and TransUnion credit score, there are several key factors to keep in mind. First and foremost is the inclusion of rental history. Equifax has a significant edge here, as they accept and report on rent payments. This information is gold for us landlords.

Another crucial factor is the depth and accuracy of credit information. Both bureaus collect data from various sources, but they might have slightly different information. For instance, Equifax might have details from a particular lender that TransUnion doesn’t, or vice versa. Credit scores from Equifax and TransUnion are crucial for major financial products, such as a personal loan, as lenders rely on these scores to assess the creditworthiness of borrowers.

When to use credit scores from both credit reporting agencies

In my experience, if you're dealing with a high-value property or have had issues with tenants in the past, it's worth pulling both Equifax and TransUnion credit scores. This gives you the most comprehensive view of a potential tenant's financial history.

Using both credit scores can also help you spot any discrepancies. If you see significant differences between the two, it might be a red flag that warrants further investigation. Remember, when it comes to protecting your investment, you can never have too much information.

However, if you're going to pick just one, most landlords (including myself), lean towards Equifax. Their inclusion of rental history data (if it exists) gives us a clearer picture of how a tenant might behave in terms of rent payments. After all, past behavior is often the best predictor of future actions when it comes to financial responsibility.

Where do I pull an Equifax or TransUnion Credit Report?

For Equifax, you can go to their website directly and pull their credit report. When you get the report from the credit reporting agency directly, you get the best pricing because it minimizes the added-margin costs that other screening companies put on-top of it.

For TransUnion, you will have to work with a Tenant Screening Company.

Tenant Screening Companies do add their own flare like a better user experience on top of what Equifax or TransUnion provides.

For example, SingleKey offers housing providers the option to purchase one, both, and even another one from an international screening company called Nova Credit. Prices range from $25.99 to $60.00+ but you can take your pick!

Concluding Final Thoughts

At the end of the day, the goal is to protect your investment and ensure a smooth rental experience. Whether you use one credit report or both, the key is to make an informed decision based on comprehensive information. Trust me, the time and money spent on thorough tenant screening is an investment that pays off in the long run, helping you avoid the stress and financial strain of dealing with problematic tenants.