Credit Score Requirements
Your credit score is one of the first things a lender will look at when you apply for a mortgage. It influences whether you get pre-approved, what interest rate you receive, and which lenders are willing to work with you. Understanding where you stand — and how to improve if needed — is one of the most impactful things you can do before starting the home buying process.
What Score Do You Need?
Section titled “What Score Do You Need?”In Canada, credit scores range from 300 to 900. The score is calculated by credit bureaus (Equifax and TransUnion) based on your borrowing and repayment history. Here is what lenders typically require:
- 680+ — You will qualify with most lenders at the best available rates. This is the target to aim for. At this level, major banks, credit unions, and monoline lenders will compete for your business, which can translate into lower rates and better terms.
- 650 to 679 — Most A-lenders (big banks and credit unions) will still approve you, but you may not get the very best rate. You could end up paying 0.1% to 0.25% more than someone with a 720 score, which adds up significantly when choosing between fixed and variable rates. On a $400,000 mortgage, that difference costs roughly $2,000 to $5,000 over a 5-year term.
- 600 to 649 — You may qualify with some A-lenders, but you will likely need a larger down payment or face a higher rate. B-lenders (alternative lenders like Home Trust, Equitable Bank, or ICICI Bank Canada) become your primary option. B-lender rates are typically 1% to 2% higher than A-lender rates.
- Below 600 — Most traditional lenders will decline your application. You will need to work with private lenders, which come with significantly higher rates (often 7% to 12% or more) and fees. Private mortgages usually have terms of just 1 to 2 years, with the expectation that you will improve your credit and refinance with a traditional lender.
How to Check Your Credit Score for Free
Section titled “How to Check Your Credit Score for Free”Every Canadian can check their credit score without paying a fee. There is no reason to pay for a credit monitoring service just to see your score.
Equifax
Section titled “Equifax”- Request your free credit report at equifax.ca or by mail. The free report from Equifax’s website does not include your actual score number — it shows your credit history and accounts.
- For your free Equifax credit score, use Borrowell (borrowell.com). Borrowell provides your Equifax score for free, updated weekly, with no impact on your credit.
TransUnion
Section titled “TransUnion”- Request your free report at transunion.ca or by mail. Like Equifax, the free direct report may not include the score number itself.
- For your free TransUnion credit score, use Credit Karma Canada (creditkarma.ca). Credit Karma provides your TransUnion score for free, updated weekly.
Why Check Both?
Section titled “Why Check Both?”Some lenders report to only one bureau, not both. Your Equifax score and TransUnion score can differ by 20 to 50 points or more. Checking both gives you a complete picture. More importantly, review your reports carefully for errors — incorrect late payments, accounts that do not belong to you, or outdated information. Studies have found that a significant percentage of credit reports contain at least one error. Disputing mistakes with the bureau can boost your score quickly, sometimes by 30 to 50 points or more.
How to Improve Your Credit Score
Section titled “How to Improve Your Credit Score”If your score needs work, here are the most effective strategies, listed in order of impact:
1. Pay Every Bill on Time
Section titled “1. Pay Every Bill on Time”Payment history is the single biggest factor in your credit score, accounting for about 35% of the total. Even one missed payment can drop your score by 50 to 100 points. Set up automatic payments for at least the minimum amount on every credit card, loan, and bill. If you have missed payments in the past, start a perfect payment streak now — each month of on-time payments helps.
2. Reduce Your Credit Utilization
Section titled “2. Reduce Your Credit Utilization”Credit utilization — the percentage of your available credit that you are using — accounts for about 30% of your score. Aim to use less than 30% of your available credit. If you have a $10,000 credit limit across all cards, keep your total balances below $3,000. Below 10% is even better and can give your score a noticeable boost.
Example: Sarah has two credit cards with a combined limit of $15,000. She typically carries a $7,000 balance (47% utilization). By paying her balance down to $4,000 (27% utilization), her score could improve by 30 to 50 points within one to two billing cycles.
If you cannot pay down balances quickly, consider requesting a credit limit increase (without increasing your spending). This lowers your utilization ratio. Be aware, though, that some credit limit increase requests trigger a hard inquiry.
3. Do Not Close Old Credit Accounts
Section titled “3. Do Not Close Old Credit Accounts”The length of your credit history matters — it makes up about 15% of your score. Keep your oldest credit card open, even if you rarely use it. Closing a 10-year-old credit card shortens your average account age and can reduce your score. Put a small recurring charge on it (like a streaming subscription) and set up autopay to keep it active.
4. Avoid Applying for New Credit
Section titled “4. Avoid Applying for New Credit”Each credit application creates a hard inquiry that temporarily lowers your score by 5 to 10 points. In the 6 to 12 months before applying for a mortgage, minimize new credit applications. Do not sign up for store credit cards, do not apply for a new car loan, and do not open new lines of credit unless absolutely necessary.
Note: Checking your own credit score through Borrowell, Credit Karma, or directly from the bureaus is a soft inquiry and does not affect your score.
5. Diversify Your Credit Types
Section titled “5. Diversify Your Credit Types”Having a mix of revolving credit (credit cards, lines of credit) and installment credit (car loan, student loan, personal loan) can help your score. This factor is about 10% of the total. If you have only credit cards, adding a small installment loan (if you need one) can improve your credit mix. But do not take on debt just for the sake of your score.
6. Dispute Errors on Your Report
Section titled “6. Dispute Errors on Your Report”Review your credit report from both Equifax and TransUnion. Look for:
- Late payments that you actually paid on time
- Accounts you do not recognize (possible fraud or reporting error)
- Incorrect balances or credit limits
- Closed accounts still showing as open, or vice versa
- Old negative items that should have aged off (most negative items are removed after 6 to 7 years in Canada)
File disputes directly with the credit bureau online. They are required to investigate within 30 days. Correcting errors is one of the fastest ways to improve your score.
How Long Does Improvement Take?
Section titled “How Long Does Improvement Take?”The timeline depends on what you are fixing:
- Paying down high balances: Score improvements can show up within 30 to 60 days after the lower balance is reported to the bureaus.
- Establishing on-time payment history: After 3 to 6 months of perfect payments, you will see gradual improvement. After 12 months, the impact is substantial.
- Recovering from missed payments: A single missed payment can take 12 to 24 months to significantly fade in impact, though it remains on your report for 6 years.
- Recovering from collections or bankruptcy: This is a longer road — typically 2 to 3 years of rebuilding before you can qualify with a traditional lender.
What Lenders Look at Beyond Your Score
Section titled “What Lenders Look at Beyond Your Score”Your credit score is important, but lenders also look at:
- Payment patterns: Even if your score is good, a lender will look at how you manage payments. Consistent minimum payments with no missed deadlines look better than erratic payment behaviour.
- Outstanding debt: How much total debt do you carry? This feeds into your debt service ratios, which we cover in the financial checklist section.
- Credit inquiries: Multiple hard inquiries in a short period can signal financial stress. However, mortgage-related inquiries within a 14 to 45-day window are typically treated as a single inquiry, so shopping around for rates is fine.
- Bankruptcy or consumer proposals: These remain on your credit report for 6 to 7 years and will significantly limit your mortgage options during that period.
If you know homeownership is a goal, start working on your credit score now. Even small improvements can unlock better rates and save you thousands over the life of your mortgage.