When you apply for a mortgage, one of the first things a lender looks at is your credit score. It is a snapshot of your financial habits — how you manage debt, make payments, and handle credit over time. While income and down payment are key factors in mortgage approval, your credit score often determines what kind of mortgage you qualify for and what rate you receive.
Understanding how credit scores work, and how to improve yours, can make a real difference when it comes time to apply for a mortgage or refinance an existing one.
What a Credit Score Represents
In Canada, credit scores range from 300 to 900, with higher scores representing lower risk to lenders. The number is calculated by credit bureaus like Equifax and TransUnion, based on information from your financial accounts and borrowing history.
Here’s a general breakdown:
- 760–900: Excellent – gives access to the best mortgage rates and terms
- 725–759: Very good – usually approved with favourable rates
- 660–724: Good – likely to qualify, though some conditions may apply
- 560–659: Fair – may face higher rates or stricter requirements
- Below 560: Poor – mortgage approval will be difficult and may require a private or alternative lender
Your credit rating reflects how consistently you pay your bills, how much credit you use, the length of your credit history, and whether you’ve had any accounts in collections or bankruptcies.
Why Lenders Care About Your Credit Score
Lenders use your credit score as a quick, objective way to gauge how risky it is to lend you money. When you apply for a mortgage, they are not just evaluating your current situation — they’re assessing the likelihood that you’ll make consistent payments for years to come.
A higher score generally signals:
- Lower default risk
- Stronger financial discipline
- Better ability to manage multiple credit products responsibly
That’s why people with higher scores typically receive lower interest rates and better mortgage options, which can save thousands of dollars over the life of the loan.
For example, someone with an 820 credit score might be offered a rate that’s 0.25% to 0.5% lower than someone with a 660 score. Over a five-year term, that difference can amount to thousands in interest savings.
How Your Credit Score Affects Mortgage Approval
While there is no single cutoff score, most A-lenders (major banks and credit unions) prefer scores above 680. Borrowers below that range may still qualify but will likely need a larger down payment or will be referred to a B-lender or alternative lender, who may charge higher rates to offset perceived risk.
Alternative lenders play an important role for people rebuilding credit or who have non-traditional income sources, but improving your score can open more competitive mortgage options in the future.
Key Factors That Influence Your Credit Score
- Payment History (35%)
Making all payments on time is the single biggest factor. Late or missed payments can stay on your report for up to six years. - Credit Utilization (30%)
This measures how much of your available credit you use. Keeping your balances below 30% of your total limit shows lenders you manage credit responsibly. - Length of Credit History (15%)
Older accounts help build stability. Closing long-standing accounts can actually lower your score. - Credit Mix (10%)
Having a variety of credit types (credit card, car loan, line of credit) can demonstrate experience managing different obligations. - New Credit Inquiries (10%)
Too many applications in a short period can make you appear risky. Mortgage pre-approvals and rate checks with brokers are usually treated as a single inquiry when done within a few weeks.
How to Improve Your Credit Score Before Applying for a Mortgage
Improving your credit score is possible — but it takes time and consistency. If you are planning to apply for a mortgage within the next year, these steps can help strengthen your profile.
1. Make Every Payment on Time
Even one missed payment can significantly impact your score. Set up reminders or automatic withdrawals to ensure your bills are paid before the due date.
2. Reduce Credit Card Balances
Try to use less than 30% of your available limit on any credit card or line of credit. Paying down high-interest debt not only improves your credit score but also makes your mortgage application stronger.
3. Keep Old Accounts Open
Unless they carry high fees, maintaining long-term accounts helps demonstrate stable credit behaviour. The age of your oldest account matters.
4. Limit New Credit Applications
Each new application generates a hard inquiry, which can temporarily lower your score. Only apply for credit when necessary.
5. Check Your Credit Report for Errors
Mistakes happen. Obtain a free credit report from Equifax or TransUnion and dispute any incorrect information, such as outdated accounts or duplicate debts.
6. Avoid Co-Signing New Loans
Even if you’re helping a friend or family member, co-signing makes you responsible for their payments. If they miss one, it affects your score.
7. Work with a Mortgage Professional Early
A broker can review your credit situation months in advance, helping you understand what lenders will see and how to strengthen your application. They can also connect you with lenders that are more flexible while you work on improving your score. Contact The Local Broker today and we can help with a plan to tailored to your unique needs.
The Long-Term Impact of a Strong Credit Score
A higher credit score does more than help you get approved — it sets you up for long-term financial success. It gives you:
- Access to lower mortgage rates
- Greater choice among lenders
- Negotiating power when renewing or refinancing
- Confidence that you are financially ready for home ownership
A strong credit profile also provides flexibility if you decide to invest in property, refinance for renovations, or consolidate other debts in the future.
Final Thoughts
Your credit score is not just a number — it is a reflection of your financial habits and discipline. The good news is that it can always be improved with time, consistency, and the right strategy.
If you are planning to buy a home or renew your mortgage in the near future, take the time to check your credit report and make small, steady improvements. You might be surprised at how much difference a few months of good credit habits can make.
When you’re ready to take the next step or want to understand what options are available based on your credit profile, The Local Broker can help.
👉 Start your mortgage application today.
