Your credit score directly affects the mortgage rate you'll qualify for—and even small improvements can save you thousands over your mortgage term. Whether your score needs work or you simply want to maximize your rate options, these practical strategies will help.
Why Your Credit Score Matters
Your credit score directly affects your mortgage rate. The difference between "good" and "excellent" credit can mean 0.25% to 0.50% in rate—which adds up to $10,000+ in interest over a typical mortgage.
Understanding Credit Score Ranges
In Canada, credit scores range from 300 to 900:
Target: Aim for 720+ to access the best mortgage rates.
Quick Wins (1-3 Months)
Pay Down Credit Card Balances
Your credit utilization ratio is huge. Keep balances below 30% of your limit.
Example: If you have a $10,000 limit, keep your balance under $3,000.
Don't Close Old Accounts
Length of credit history matters. Keep old accounts open, even if unused.
Set Up Automatic Payments
Never miss a payment. Even one 30-day late payment can drop your score 50-100 points.
Start Improving Your Score Today
If you're planning to buy a home, start working on your credit now. Get pre-approved to see where you stand and get personalized advice from our team.
Medium-Term Strategies (3-6 Months)
Check and Dispute Errors
Order your free credit report from Equifax and TransUnion. Errors are more common than you'd think—dispute any you find.
Become an Authorized User
If a family member has excellent credit, ask to be added to their account. Their positive history can help yours.
Diversify Your Credit Mix
Having different types of credit (credit cards, lines of credit, installment loans) shows lenders you can manage various obligations.
Long-Term Habits for Credit Success
- Pay every bill on time – This is 35% of your score
- Keep utilization low – Use credit, but don't max it out
- Limit new applications – Each creates a hard inquiry
- Monitor regularly – Catch issues before they become problems
- Be patient – Good credit is built over time
Common Credit Myths Debunked
Myth: Checking my own credit hurts my score.
Reality: Checking your own score is a "soft inquiry" and doesn't affect it.
Myth: I need to carry a balance to build credit.
Reality: Pay in full monthly—it builds credit without paying interest.
Myth: Closing cards improves my score.
Reality: It often hurts by reducing available credit and shortening history.
Learn more about how mortgage shopping affects your credit.
FAQ
Q: How quickly can I improve my credit score?
A: Paying down credit cards can improve your score within 30-60 days. Other changes take 3-6 months to fully reflect.
Q: Will a mortgage pre-approval hurt my score?
A: A single inquiry has minimal impact (5-10 points). Multiple mortgage inquiries within 14-45 days count as one.
Q: Can I get a mortgage with bad credit?
A: Yes, through alternative or private lenders, though at higher rates. Many use these as stepping stones while rebuilding credit.
Q: Should I pay off collections before applying?
A: Sometimes. Paid collections can actually lower your score short-term. Consult with us before paying old collections.
What's Next
Start monitoring your credit score today using free services like Credit Karma or Borrowell. When you're ready to buy, get pre-approved to see your exact rate options—we can advise on credit improvement strategies specific to your situation.
Ready to Get Started?
Contact us today for personalized mortgage advice and competitive rates.
