When you visit a lender for a mortgage, the lender will consider several factors to determine your suitability as a borrower. These include your income, your existing debts, your expenses, the amortization period, your employment status, the down payment you can put up, and your credit score.

How important is credit score for a mortgage in Canada? The credit score is so important that even if you tick all the boxes, most lenders will still not give you a mortgage if you have a bad credit score.

Another advantage of a good credit score is that most lenders come up with mortgage rates by credit score Canada; the higher the credit score, the lower the interest rates. Lenders look at the credit score because this tells them your likelihood of repaying the mortgage loan. When you have a low credit score, it is for a reason. It could be due to a history of late repayment or bad debt. Mortgage interest rates are not always fixed. A good credit score gives you greater negotiating power – you can negotiate for a higher credit limit or a better interest rate.

In this article, we will get to understand what a credit score is, break down what constitutes a good score and a bad score, and see how credit scores are calculated. We will discuss what you stand to gain from having a good credit score and what you stand to lose with a bad score. We will go into the details of what lenders look for when giving a mortgage loan and the minimum credit score needed to buy a home. We will also give valuable tips and strategies to help you improve your credit score. Finally, we will see if hiring a mortgage broker can increase your chances of getting a mortgage and of getting a better credit score.

Understanding Credit Scores



    Payment History


    Current Credit Status


    Length of The
    Credit History


    Credit Applications/


    Types of
    Credit Used

Is a Credit Report the Same Thing as a Credit Score?

In Canada, every person who has ever taken a loan has a credit report. This is a summary of all loans you have ever taken. The report contains information on late repayments, bad cheques issued, non-sufficient funds payments, and credit you use (including loans, credit cards, store cards, retail cards, and lines of credit). A credit report also includes your personal information, personal records, and credit inquiries.

What is a Credit Score?

This is a number that is calculated from the information that is in the credit report. Lenders use the credit score to determine your likelihood of repaying a loan. A high score means you are unlikely to default on a loan and vice versa. Note that if you have a poor score and the lender still gives you a loan, more often than not, you will be charged high interest. Your credit score changes frequently based on updates to your credit report.

You have an opportunity to improve your credit score just before taking a loan through such strategies as debt consolidation. So, what is a good credit score? A score of 724 to 760+ is considered good.

Credit Bureaus

There are 2 credit bureaus in Canada, namely Equifax and TransUnion. These credit bureaus are responsible for maintaining your credit report and calculating your credit score. Your credit score may be slightly different between the 2 credit bureaus because:

  • Not all lenders provide updates to both credit bureaus – some provide to only 1, and some do not even provide updates.
  • Credit bureaus may use data from other companies that provide credit scores, such as the U.S.-based FICO.
  • The credit score is industry-specific. For example, a credit bureau may place more emphasis on your repayment history when calculating auto loan interests.

Credit Score Calculation Algorithm

The different factors that determine your credit score are given different weights to come up with a credit score, depending on the scoring model in use.

  1. Payment History (35%): This helps your creditors determine if you are able to repay the loan. If you have struggled to repay previous loans, chances are you will struggle with the loan they give you, and vice versa. Note mortgage payments do not reflect on the credit report, but everything else, from student loans to lines of credit, do. Judgments, liens, and bankruptcy are also included in the report.
  2. Current Credit Status (30%): Lenders want to know how much you owe to ensure you are not stretched too thin. For example, if you have already committed 50% of your salary, chances are that you may struggle to repay any new loan.
  3. Length of The Credit History (15%): Despite popular belief, lenders actually want borrowers who have taken and repaid loans in the past, as this assists them in judging a borrower’s ability to repay. If you don’t take loans, how else can a lender know if you even know how to use credit responsibly? However, note your score will not be favourable if you have used credit recently. What lenders want is a borrower who has taken different loans over a long period and repaid them. Note information on your credit report is usually expunged after 6 to 7 years, be it good or bad. Individuals who have gone through bankruptcy, debt management programs, consumer proposals, and orderly payment or debt get a clean slate when they complete the programs.
  4. Credit Applications/Inquiries (10%): Frequent credit applications send the wrong signal to lenders – it tells them that you may have financial difficulty. The algorithm considers how many times your credit score status has been inquired about over the last 5 years, the number of new credit accounts, and whether you are re-establishing your credit history.
  5. Types of Credit Used (10%): Lenders do a credit score check to see if you have payment plans or deferred interest, as this may point to questions about your ability to handle your money.

Credit Score Ranges in Canada

Understanding credit score range is important as it helps you know when you need to take deliberate action to improve your score. 900 is the highest credit score in Canada, and 300 is the lowest.

Note that the lender has discretion in determining what is good and what is bad. For instance, what is a good credit score in Canada for a mortgage for Lender A may be a fair credit score for Lender B. Equifax and TransUnion use different scoring models but below are the general guidelines that lenders use when interpreting credit score ranges:

760+: Excellent

A credit score above 760 is considered to be excellent by most lenders. Note some lenders may only consider credit scores over 780 to be excellent. It takes a lot to have an excellent score, so most lenders will give you favourable interest rates with an excellent score. So, is it possible to get a 900 credit score in Canada? The maximum score you can get is 900, so it is theoretically possible if everything aligns in your favour, but anything over 760 is okay.

759 – 725: Very Good

This range means the borrower is financially responsible regarding credit management and money in general. It means the borrower takes credit regularly and is able to service it. It also means the borrower’s credit card balances are relatively low and within the limits.

724 – 660: Good

Having this credit range means the borrower is near average or slightly above average. These borrowers are still able to get attractive interest rates, but it may be more difficult for them to get some type of credit. Shopping for an unsecured loan is much more difficult with this score, but secured loans are usually not a problem.

659 – 560: Fair

These borrowers usually have a ding on their credit reports but no major delinquencies. In most cases, these borrowers will still get credit from most lenders, but not at competitive interest rates.

559 – 300: Poor

A poor credit score should be repaired before you attempt to get a mortgage because most lenders will not lend you money. Just like with an excellent score, it takes a lot to have a poor score, such as defaults on multiple credit products. It could also be that the borrower is recovering from bankruptcy. You need to take immediate action to repair your credit score if you fall within this range.

What is the average credit score in Canada?

According to TransUnion, the average credit score in Canada is 650, which falls under the “Fair” range. This means the average Canadian is able to get a mortgage, but it may need to be insured or at a higher interest rate. Average credit scores also vary by province, with provinces with stronger economies, like Ontario having higher average credit scores. When looking at the average Canadian credit score by age, those between 18 and 25 have the lowest average score at 692, while those over 65 have the highest score at 750.

What is a Good Credit Score for Buying a House in Canada?


A good credit score shows the lender that you don’t have a lot of debt.

It helps you get your mortgage from a leading bank.

It affects the repayment history, which is the most important factor in credit score calculation (35%).

If you have been repaying your loans in time, you will have a better score compared to someone who is just starting out.

Lenders will have questions about the ability of people with deferred payment plans.

Lenders only give mortgages once they are satisfied that there is little if any, risk of default. Where they see a little risk, they protect themselves by charging higher interest rates or requiring the borrower to put down a bigger down payment. Working on your credit score is, therefore, paramount if you want to get a mortgage hustle-free and at a competitive interest rate.

What does your Credit Score Need to be to buy a House for the First Time?

Are you wondering if you can get a mortgage with a 650 score? 650 may be the national average and is ideal for most types of loans, but you need at least 680 with most lenders, according to 2022 statistics.

The ideal credit score for a mortgage was previously 600 but was adjusted to 680 by the Canada Mortgage and Housing Corporation (CMHC). Note the CMHC minimum score only applies to at least 1 borrower. This means the minimum credit score for a mortgage with a co-signer is still 680 but for one of the borrowers only.

What is an insured mortgage?

An insured mortgage, also called a CMHC mortgage, is a mortgage where the borrower contributes a down payment of between 5% and 20% of the purchase price. Mortgage default insurance is meant to protect the lender against default. Note while CMHC is the leading mortgage default insurance provider in Canada, there are other smaller providers: Canada Guaranty and Genworth Financial. However, there are options available even to those with a lower credit score.

How Can a Good Credit Score Lead to Better Mortgage Terms?

A good credit score above 680 will increase your chances of getting a mortgage and vice versa. There are several reasons for this:

  1. A good credit score shows the lender that you don’t have a lot of debt since one of the factors that affect the credit score is credit utilization. If you have too much debt, you are less likely to make regular, timely mortgage repayments. Banks want to reduce risk as much as possible, and when they give mortgages to individuals with poor debt-to-income ratios, they do so with much higher interest rates.
  2. Most of the big mortgage lenders, like the major banks, are very strict regarding mortgage approval requirements. If you want to get your mortgage from a leading bank, there is usually no negotiation when it comes to a credit score of 680 and above. Subprime and private lenders, trust companies, and credit unions are still available if you want a mortgage with a 640 credit score, but their interest rates are much higher.
  3. A good credit score tells the lender that you have a good repayment history – this is the most important factor in credit score calculation (35%). If you have struggled with repayments in the past, your score will show it.
  4. A good credit score also tells the lender that you have been taking credit. Lenders do not want novice borrowers since they do not have a way of knowing if they are risky or not. If you have been borrowing and repaying your loans in time over a long period, you will have a better score compared to someone who is just starting out. This is the main reason the average credit score for an 18-25-year-old is significantly lower than that of individuals 65+ and above.
  5. If you have had deferred interest or payment plans, this will lead to a low credit score. Lenders will have questions about the ability of people with such financial pasts to handle their money.

How to Improve Your Credit Score


Pay off your debt

Consider debt consolidation

Pay bills and debt repayments on time

Be careful with credit cards

Be on the lookout for errors and fraud in credit reports

Do not go over the limit

Work on your credit history

Talk to your creditors if you are unable to meet your obligations

We have discussed the importance of having a good credit score when seeking a mortgage. So, how can you improve a bad score to at least the CMHC-recommended 680? Below are a few proven tips and strategies on how to increase your credit score quickly in Canada. As you will see, most have to do with maintaining good financial habits.

Pay off your debt

Your current debt is an important factor in credit score calculation. Lenders do not want borrowers who carry large debts as such borrowers are more likely to struggle to meet their mortgage repayment obligations.

You can use the avalanche method to pay off your debt, where you make the minimum repayment on each debt, then tackle the debt with the highest interest with the remaining money. The other option is the snowball method, where you pay off the smallest debt first. While the snowball method is good for your mental health, as you will see many debts disappearing, the avalanche method is a more financially sound option if you want to increase your credit score by 100 points in Canada.

Consider debt consolidation

If you are in debt that is affecting your credit score, an effective way of regaining control is debt consolidation. Debt consolidation, as the term suggests, involves combining different loans into one easier-to-manage and more affordable loan, either unsecured or secured, to get rid of high-interest debt. The more affordable loan will eventually help you improve your credit score.

Pay bills and debt repayments on time

If you delay paying your bills and debt repayments, you will end up paying more in the form of interest charges. A history of late payments also affects your credit score. Note that paying the minimum amount is good for your credit score, but your credit score still suffers from a credit utilization standpoint. There are apps that can help you manage your spending.

Be careful with credit cards

There are many loan offerings and reward credit cards in Canada, but taking more credit than you need is bad for your credit score. Each lender you approach will do a hard credit check. Frequent credit checks have a negative impact on your credit score and make lenders assume that your application is being denied. So, how do you increase your credit score quickly? Go for a credit card with a low annual percentage rate (APR) of below 20% and no annual fees. If you are looking to build your credit, consider entry-level secured credit cards or student credit cards. These cards rely on your deposit (usually equal to the limit of your card), not your credit score.

Be on the lookout for errors and fraud in credit reports

Sometimes TransUnion and Equifax make errors that can impact your credit score. Common errors include personal information errors, inaccurate or outdated negative information, and accounts you have never opened. The Financial Consumer Agency recommends that you check both credit reports at least once per year for fraud and errors. Get a free credit score in Canada from TransUnion or Equifax to check.

Do not go over the limit

Your credit usage rate should be below 35% to avoid damaging your credit score. All credit cards and loan products have a limit. If your card has a limit of $10,000 and an average borrowing amount of $2,000, the credit usage rate is 20%. Take the credit usage rates of your different credit cards, loans, and lines of credit and do an average to get your average credit usage rate.

Work on your credit history

Your credit history has the greatest impact on your credit score. Lenders prefer older borrowers to newer ones as older borrowers are more predictable based on past repayment. An important tip on how to raise your credit score by 200 points in 30 days is to use such tips and strategies as going for cards with balance transfers and keeping older accounts open even when you don’t need them.

Talk to your creditors if you are unable to meet your obligations

If you have a loan and are struggling to meet your monthly repayment obligations, consider talking to your creditor. Being forthcoming may lead to the creditor restructuring the loan, such as giving you a longer repayment period with lower premiums. This also ensures your creditor does not report you to the credit bureaus.

How long does it take to improve your credit score in Canada?

According to the Financial Consumer Agency, it takes between 30 and 90 days after a credit-impacting event to see a change in your credit score. The duration depends on the specific aspects of the credit report that you are working on.

The Role of Credit Score in Your Home Buying Journey

In Canada, the credit score is the main thing lenders consider when deciding whether to give a borrower a mortgage. A credit score tells the lender many things. You will have a bad score if you have too many debts that stretch you thin, a bad repayment history, no history of taking loans, and if you have deferred interest or payment plans.

You want a credit score of above 680 to access mortgages from major lenders such as banks. With a lower credit score, you can still get a mortgage from credit unions and other lenders, but at a higher interest rate.

You can improve your credit score by paying off your debt, keeping within your credit limits, doing debt consolidation, paying off debt in good time, and correcting errors in your credit report. You can also engage your creditors to ensure you are not reported and to restructure your loan.

If you are really struggling to revamp your credit score, consider enlisting the services of a professional. A professional has the experience necessary to put you back on the right track. At Certified Mortgage Brokers, we have successfully assisted clients in Ontario with their mortgages for many years. Our mortgage services include residential and commercial mortgages, second mortgages, self-employed mortgages, mortgage refinance, and home equity takeout.

If you have a bad credit score, we have an experienced team to consolidate your debt. Our other services include assisting you to get bad credit mortgages, consumer proposal mortgages, emergency mortgages, reverse mortgages, 5% mortgages, and more.

We will help you look for the most competitive mortgage rates – you don’t leave the comfort of your home. Call us today at +1 866 921 8890 to speak to one of our representatives about a customized mortgage solution.