Here's Minimum Credit Score for a Mortgage in Canada

While most Canadians do their best to save up a large down payment, the vast majority need to rely on a mortgage to be able to buy a new home.

Getting approved for a mortgage and what kind of rates you’re offered depends on your financial health, including your credit score. Here’s what you need to know about credit score requirements for mortgages in Canada.

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Aim for a 680 credit score to get a mortgage in Canada

When it comes to getting a mortgage, the higher your credit score, the better. A good credit score will ensure that you:

Actually get approved for the mortgage, and
Get a favourable mortgage interest rate.

In Canada, credit scores range from poor (around 300) to excellent (900).

Anything above 660 is considered to be a good credit score, which means that your risk for defaulting on your mortgage is low and you’re a safe candidate for a loan.

While it will vary by lender and type of mortgage, in general, the minimum credit score to be approved for a traditional mortgage is around 680. Some lenders may go a little lower, but again, higher is better.

Several factors can impact your credit score, including:

Payment history. Do you pay your credit card bills on time?
Credit utilization. You should use less than 35% of your available credit.
Credit history. The longer you have had your credit accounts, the better.
New credit requests. How recently and often have you applied for new loans or credit cards?
Types of credit. Having a mix is best, such as a credit card and a line of credit.

If you’re unsure of your credit score, you can get it from one of the two credit-reporting agencies in Canada: Equifax Canada or TransUnion.

You can check your credit score for free at least once each year. You can also pay for credit monitoring services that may allow you more frequent access to your score.

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How your credit score affects your mortgage

Your credit score can have a positive or negative impact on your mortgage eligibility.

A high credit score signals low risk to a creditor, while a low score or no credit history may signal higher risk.

Understandably, banks don’t want to lend lots of money to someone they deem as potentially unlikely to pay it back. If they do, it will be at a much higher interest rate that reflects that risk.

For you, those higher interest rates mean bigger mortgage payments and a steeper total mortgage cost over time.

What other factors do lenders consider applying for a mortgage?

Your credit score plays a large role in the mortgage approval process, but it’s not the only factor a lender will look at when deciding whether or not to approve your loan.

Other key factors include:

Debt service ratios, like your gross and total debt service ratios.
Loan amount (a larger loan is riskier).
How you’ll use the real estate.
The amortization period you choose.
Your employment record.
Monthly housing costs associated with your new home (including potential property taxes, utility bills, and condo fees, if necessary).
Stress test results. You need to prove to the lender that you are capable of affording your mortgage payments if interest rates increase. To do so, the lender will calculate whether they would approve you at an interest rate of either 5.25% or your potential rate plus 2%.

Can I get a mortgage with bad credit?

Most big lenders, such as major banks, are pretty strict regarding requirements for mortgage approval. Since your credit score is a key factor, chances are a big bank won’t approve you if you have poor or limited credit. However, that doesn’t mean that you’re completely out of luck.

People with lower credit scores can look to credit unions and trust companies or subprime and private lenders to see if they will approve you for a bad credit mortgage. These types of financial institutions are usually more likely to help individuals who are considered risky borrowers. That being said, if you apply for a mortgage with a bad credit score, you’ll likely be given a significantly higher interest rate.

If you have a poor credit score or limited credit history, other options include:

Saving more so that you have a larger down payment.
Considering a joint mortgage.
Adding a co-signer.

That said, it’s probably in your best interest to delay your mortgage application and house-hunting process. Take the time to pay down your debts and improve your credit so that you can be approved by a big lender and get the best interest rates possible.