Did you know that the vast majority of lenders in Canada won’t loan you money to buy a house if your credit score is below 620? Doesn’t matter if you have a very large down payment, or a famous parent bankrolling your purchase—if you have bad credit or your credit score is low, you won’t get approved for a mortgage loan.
What is a Good Credit Score in Canada?
In Canada, lenders use a three-digit number known as a credit score to determine how ‘safe’ it is to lend you money. The higher your credit score, the better terms and options you have when trying to borrow money.
Canadian Vs. American Credit Scores
While American and Canadian lenders both use credit score ranges, these ranges—and the categories that distinguish a poor credit score from an excellent credit score—are not the same.
Canada Credit Score Range
In Canada, credit scores range from 300 to 900 with scores falling into five distinct categories:
- Poor – 559 and under.
- Fair – 560 to 659
- Good – 660 to 724
- Very Good – 725 to 759
- Excellent – 760 and over
What is a Good Credit Score in Canada?
The average credit score, in Canada, is 650, according to Transunion, one of two credit agencies in Canada. With an average credit score, you will qualify for more financial products, including car loans, credit cards with larger borrowing limits and higher mortgage amounts with better rates.
However, most lenders don’t consider 650 to be a good credit score. A good credit score in Canada falls between 660 and 724—at this range, you have a much greater chance of being approved for a mortgage at the top end of your house buying budget, and a much greater chance of getting that mortgage with a traditional lender.
Credit Score Needed For a Mortgage
Anyone with a credit score below 620 will find it very hard to find a mortgage. It may be possible to find a loan with an alternative lender or a private lender but it will mean a higher mortgage rate and less favourable borrowing terms.
In general, you will need a credit score of 640 to get a mortgage in Canada; however, borrowers with credit scores greater than 680 will get access to more money and better rates (all else being equal).
To find out how lenders will treat your application for a mortgage you first need to learn how to check your credit score.
How to Check Credit Score in Canada?
These days it’s relatively easy to check your credit score for free.
Option 1: Check if your bank or credit union offers this service. Many of the bigger banks and credit unions in Canada now offer this service, for free, to paying customers. Call your banks or credit unions customer service line or go online to your chequing or savings account and look for links to free credit score reports.
Option 2: Use a third-party company for a free credit score report. Companies like, Borrowell, Mogo and Credit Karma all offer access to free credit scores and credit reports. Borrowell and Mogo give you access to a free Equifax credit score, while Credit Karma gives you access to a free TransUnion credit score and report.
Option 3: Go online and pay a small fee to Equifax or TransUnion to view your credit report and see your credit history.
How to Improve Your Credit Score in Canada?
If your credit score isn’t as high as you need it to be to get a mortgage, consider how to increase your credit score using these 10 strategies.
1. Pay Off Past-Due Accounts
If you want to improve your credit score, pay your past-due accounts. Overdue and delinquent accounts—bills you haven’t paid—seriously damage your credit score. If you want to improve your score quickly, pay off all past-due accounts as fast as possible.
2. Pay Your Bills On-Time
Since the biggest factor to impact your credit score is payment history, the biggest boost to your score is to pay all bills, on time. Even if you can only make the minimum payment, your credit score will still improve if you make that payment and pay each bill on or before the due date.
3. Reduce High Balances
Lenders look at your credit utilization—a term used to describe the difference between how much money you have available to borrow compared to how much you have already borrowed.
For instance, if your credit card company gives you a maximum borrowing limit of $10,000 and you’ve bought $8,000 worth of goods and services then your credit utilization is 80%.
To improve your credit score quickly, reduce your credit utilization ratio. Do this by paying down loans with the highest balances. Do this 30 to 60 days before making a formal application for a mortgage, and you have a much greater chance of applying for that mortgage with a higher credit score.
4. Pay Bills Before They Are Due
Another method to improve your credit score quickly is to pay your credit card and loan bills before the statement or due date.
Lenders systematically report whether or not you paid by the due date and if you pay early they’ll also report a lower balance-owed—which helps reduce your credit utilization, which helps increase your credit score.
5. Stop Using Just One Credit Card
Most people have a few methods for borrowing money but tend to favour only one or two for paying bills. To increase your credit score, vary how and where you borrow money. Not only will multiple accounts in good standing help improve your credit score, but lenders like to see borrowers who can handle different types of credit accounts and repayments of these accounts.
6. Apply for More Loans
It may seem counter-intuitive, but if you half a year or more before you need to apply for a mortgage, consider opening a few new credit or loan accounts.
This gives you access to more loan money that you don’t need (or use); more access to funds lowers your credit utilization and this helps increase your credit score.
But you need time for the hard hits—when a lender checks your credit score—to ding your score and then climb back up.
7. Ask For a Higher Credit Limit
Another way to reduce credit utilization, and gain points on your score, is to ask your current card providers and lenders for higher credit limits on your current loans.
8. Don’t Cancel Old Credit Accounts
Because credit utilization and credit age are two important factors in calculating your credit score, it’s a good idea to avoid cancelling any credit accounts just before applying for a mortgage or loan. These old accounts help to establish a longer average credit history—another part of your credit score calculation.
If you want to cancel a credit card because of an annual fee, consider asking about the options, first. Many credit card providers offer a no-fee version of their cards; switching to this card keeps your credit account intact, but removes the cost of keeping this account.
9. Make Frequent Payments
One quick way to add a few points to your credit score is to reduce balances owing. This means paying attention to statement dates and posting payments before due dates.
By making small, frequent payments — known as micropayments — throughout the month, you can keep your credit card balances down, which goes a long way to keep your credit utilization low. If you can keep your credit utilization low, rather than letting your owed amount build up by the payment date, then your credit score will benefit right away.
10. Engage in a Rapid Rescoring
Lenders typically report payments and amounts owed on a monthly basis. However, you can discuss ‘rapid rescoring’ —a service that lenders can use to make quicker than normal updates on your credit report. Not all lenders will offer this service, but it never hurts to ask.
Although a poor credit score can have a negative impact on your life, it’s not a death sentence. And fortunately, there are many ways you can work at improving your credit score.
Remember, getting approved for a mortgage is already stressful. Knowing your credit score and what’s needed to get a mortgage helps. A better score gives you access to better terms, better rates and larger mortgage loan amounts.
Use the 10 suggestions listed above to improve your credit score and improve your chance of getting a mortgage and buying a home.