When applying for a mortgage in Canada, your credit score is one of the lender's key risk indicators. It affects not just approval, but also the rate and terms you're offered. This article explains how credit scores affect mortgage rates and how to maintain good credit.
Canadian Credit Score Ranges
Canadian credit scores typically range from 300 to 900, calculated by two main bureaus: Equifax and TransUnion. Approximate ranges:
| Score range | Rating | Mortgage impact |
|---|---|---|
| 760 – 900 | Excellent | Best available rates and terms |
| 725 – 759 | Good | Near-best rates, flexible terms |
| 680 – 724 | Fair | Slightly higher rate, some term restrictions |
| 640 – 679 | Below average | Higher rate, limited options |
| 600 – 639 | Low | May need a B-lender |
| Below 600 | Poor | Traditional lenders usually decline; private lending required |
How Credit Scores Affect Rates
Credit score affects rates mainly through:
- Risk-based pricing: lower score means higher perceived risk, higher rate
- Mortgage insurance: when down payment is under 20%, score affects insurance premiums
- Mortgage amount: a low score may limit borrowing capacity
- Term flexibility: a low score may restrict prepayment privileges and other terms
Specific rate differences vary by lender and market conditions, but generally, a drop from 760 to 650 could mean a rate difference of 0.5%–1% or more.
How to Check Your Credit Report for Free
Both major Canadian bureaus offer free report access:
- Equifax Canada: free credit report available online
- TransUnion Canada: free credit report online or by phone
Free reports are usually delivered by mail or online and do not include the score. To see the score, a paid subscription may be required.
Check your credit report at least once a year to confirm accuracy and detect errors or unusual activity.
What to Avoid Before Applying
1. Opening new credit cards
Opening a new credit card within 3–6 months before applying creates a hard inquiry, which may temporarily lower your score.
2. Applying for other loans
Car loans, personal loans, and student loans all create hard inquiries. Lenders see these when reviewing your mortgage.
3. Large credit card spending
Even with on-time payments, using more than 30% of your credit limit affects your score. Keep utilization under 30%.
4. Closing old credit cards
Closing old cards shortens your credit history, which may lower your score. Keep your longest-standing cards open.
5. Missed payments
Missed payments directly affect your score. Even one missed payment can stay on your credit report for over 6 years.
How to Improve Your Credit Score
- Pay all bills on time; set up automatic payments
- Keep credit card utilization under 30%
- Avoid frequent new credit applications
- Keep older credit cards open
- Check your credit report regularly for errors
- If your score is low, consider a secured credit card to build credit gradually
Frequently Asked Questions
Q: How often is my credit score updated?
Bureaus usually update monthly, depending on how often lenders report data.
Q: Does checking my own credit report lower my score?
No. Checking your own report is a soft inquiry and does not affect your score. Only hard inquiries from lenders or credit card companies affect it.
Q: When spouses apply together, how is the score calculated?
For joint applications, lenders typically use the lower of the two scores. If one spouse has a lower score, it may affect the overall approval.
Want to know your mortgage eligibility?
Free consultation to match with the right lenders based on your credit and financial situation.
Contact Me