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The Impact of Credit on Your Mortgage

Understanding the role of your credit score in securing a mortgage is crucial for any potential homebuyer in Canada. Your credit score not only affects your ability to get a mortgage but also the terms and the rate you'll pay. Here's what you need to know about how credit impacts your mortgage prospects.

How Your Credit Score Affects Your Ability to Secure a Mortgage

What is the impact of a credit score on a mortgage in Canada?

In Canada, your credit score is a vital component of your mortgage application. It provides lenders with a quick snapshot of your financial health and history of debt management. A higher credit score suggests to lenders that you are a low-risk borrower, which can significantly enhance your chances of getting mortgage approval. Typically, a score of 680 and above is considered good, but the higher your score, the better your chances of securing favorable mortgage terms.

The Effect of Credit Inquiries on Your Score

How much does a credit check affect your score?

When lenders check your credit score, it's termed a "hard inquiry." Hard inquiries can slightly lower your credit score, typically by five points or less, depending on the other information in your credit report. While this decrease is temporary, multiple hard inquiries in a short period can accumulate and have a more significant impact. Therefore, it's wise to avoid multiple credit applications leading up to your mortgage application.

The Influence of Credit Scores on Mortgage Rates

How does your credit score affect your mortgage rate?

The interest rate you are offered on a mortgage is directly influenced by your credit score. Borrowers with high credit scores often qualify for lower interest rates because they pose less risk to lenders. Conversely, if your credit score is lower, lenders might offer you a higher interest rate to offset the increased risk they perceive. This difference in interest rates can mean thousands of dollars in additional interest payments over the life of your mortgage.

Improving Your Credit Score Before Applying for a Mortgage

To improve your chances of obtaining a favorable mortgage, focus on boosting your credit score well before you apply. This can be achieved by:

  • Paying your bills on time: Even one missed payment can hurt your score.

  • Reducing your debt-to-income ratio: Pay down as much debt as possible, especially high-interest credit card debt.

  • Keeping old credit accounts open: Long-standing accounts with good payment histories positively affect your score.

  • Limiting new credit inquiries: As noted, too many hard inquiries can reduce your score.


Your credit score is a powerful tool that lenders use to gauge your financial reliability and set terms for your mortgage. Understanding and improving your credit score can lead to better mortgage options and significant savings. Always monitor your credit regularly, especially before applying for a mortgage, to ensure you are in the best position to negotiate.