A small change in your credit score can cost you a lot of money in interest. Which means it is important to understand your credit score for mortgage approval. In Canada’s housing market, the 3-digit number is a powerful tool!
That’s why here, we’ll discuss it all. For example, what score you need, how lenders view it, and ways to improve your score.
What Credit Score is Needed for a Mortgage?
In Canada, traditional banks want to see a credit score of at least 640 before giving you a mortgage. There may be some banks that approve as low as 600. In that case, the rates would be unimpressive. And the terms will also be tougher.
If your score is below 600, look for B lenders or alternative lenders.
So, what is the minimum credit score for a mortgage in Canada? It actually depends on the lender. Here’s a breakdown:
730+: Considered a very good or excellent score
680+: Best chance with banks and great mortgage rates.
600–679: Still possible, but with tighter conditions.
Below 600: You will likely need to apply through a broker to access B lenders or private lenders.
Below 500: This is considered bad credit. It will be hard, but not impossible. You need a strong income, a large down payment, or a co-signer.
How Credit Score Affects Your Mortgage
What credit score do you need for a mortgage is not the only concern you should have. Know that your current score affects the mortgage. Your credit score will be calculated on payment history, credit use and history in most cases.
A higher score = lower interest. If you have a poor credit score, you have to pay a higher interest rate.
In the case of down payments, you may get by with 5 to 10% with good credit. With bad credit, some lenders can ask for more than 20%.
How to Improve Your Credit Score Before You Apply
Your credit score for a mortgage loan doesn’t have to be a concern if you can improve it. Starting today, practice the following:
- Always pay on time: Remember, late payments take your score down.
- Keep your credit usage low: You can use less than 30% of your available limit.
- Avoid new credit cards: Do not take out new loans right before applying.
- Check your credit report: mistakes happen, and they can hurt your score.
Final Thoughts
With a 650+ credit score for a mortgage, you’ll find it easy to secure loans in Canada. But if your score is low, that’s no reason to give up. Start building up your score. Plus, with a low score and few credit bumps, talk to a trusted mortgage broker like Asim Ali. We can help you find the right mortgage.