How to Improve Your Credit Score to Get a Better Mortgage Rate

Your credit score directly affects whether your mortgage is approved and the rate you’re offered. In Canada, scores range from 300 to 900; above 680, you can access the best rates at most banks. The two fastest levers: pay every account on time and keep your card balances under 30% of their limits.

What score do you need for a mortgage?

These thresholds vary by lender, insurer and the rest of your file (income, down payment, debts).

What makes up your score

The credit bureaus Equifax and TransUnion calculate your score from five main factors:

1. Payment history: the most important factor. A single payment 30 days late can drop your score.
2. Credit utilization: the share of your limits you’re using. Under 30% is good; under 10% is excellent.
3. Length of history: the older your accounts, the better.
4. New applications: each recorded credit application leaves a mark for a few months.
5. Credit mix: having a card, a car loan or a line of credit shows you can handle different types of credit.

8 steps to improve your score

1. Check your file for free with Equifax and TransUnion, or through services like Borrowell and Credit Karma. Checking your own file has no effect on your score.
2. Dispute errors: an account that isn’t yours, a late payment that never happened, a debt already paid. The bureaus must investigate and correct.
3. Set up automatic payments for at least the minimum on every card and loan.
4. Pay down cards before the statement date: the statement balance is what gets reported, not the balance after payment.
5. Ask for a higher limit on a card you rarely use: your utilization drops without paying more.
6. Keep old cards open, even if you rarely use them, to preserve the age of your file.
7. Don’t apply for new credit in the 6 months before a mortgage application: no car, no new card, no furniture financing.
8. Settle accounts in collection and get written confirmation of payment.

A 6-month plan before buying

Costly mistakes

• Buying a car before your mortgage: a $500 monthly car payment can cut your borrowing capacity by $75,000 to $90,000, depending on the qualifying rate.
• Closing an old card: you lose history and available credit.
• Paying a small account late (phone, store card): it counts as much as a big one.
• Co-signing a loan: the debt shows up on your file and counts in your ratios.

What if my credit is badly damaged?

A bankruptcy, consumer proposal or collection accounts usually stay on file for several years. There are still options:

• Alternative lenders: they accept weaker files, with a larger down payment (often 20%) and a slightly higher rate, while you rebuild your credit.
• Secured credit card: it helps rebuild a payment history.
• Refinancing later: after 1 or 2 years of good payments, you can often move to a traditional lender.

This is where a broker makes a difference: they know which lenders accept your profile.

Frequently asked questions

Want to know where you stand?

I can review your file, tell you which lenders fit your current situation, and what to improve to get a better offer. Start your free pre-qualification.