Why your credit score matters when you're buying a home
Owning a home is a dream for many Canadians. But that dream usually starts with a mortgage application — and if you're not sure where your credit stands, the whole thing can feel intimidating.
Here's the good news: a higher credit score gives you more mortgage options and lower interest rates. That means the path to your dream home gets a little easier (and a lot cheaper over time).
Here are five ways to improve your credit score before you apply for a mortgage in Canada.
1. Get your credit report and actually read it
You can't fix what you don't know about. Both Equifax and TransUnion provide credit reports and scores in Canada, and by law you're entitled to one free copy from each bureau every 12 months.
Order your report online or by mail, then go through it line by line. Look for errors or anything that doesn't match your records.
If you spot an inaccuracy, contact the credit bureau and get it corrected. Sometimes a simple mistake is the only thing holding your score back.
2. Pay down high-interest debt
Lenders look at your credit utilization ratio — that's the percentage of your available credit you're actually using. They like to see it below 30%.
Start with high-interest debts like credit card balances. Pay those off first if you can.
If paying them off right away isn't realistic, consider a balance transfer or a consolidation loan to bring the cost down while you chip away at it.
3. Keep your old credit accounts open
The length of your credit history makes up a big chunk of your credit score. Closing old or unused accounts can hurt that history, even if you think you're tidying up.
Keep your oldest accounts open — they show lenders you've been managing credit for a while.
And avoid opening new accounts too often. Each credit inquiry can ding your score temporarily, and a bunch of new accounts in a short window raises red flags.
4. Set up automatic payments
Your payment history is the single biggest factor in your credit score. One late payment can knock it down hard.
Use your bank's online services to set up automatic payments for all your bills. It's one less thing to remember, and it protects your score.
Just make sure you've got enough in your account to cover them — overdraft fees won't do you any favours either.
5. Mix up your credit types
Lenders like to see that you can handle different kinds of credit — credit cards, car loans, student loans, that sort of thing.
Most lenders in Canada require at least two different types of credit products (like a credit card and a car loan) reporting on your history for a minimum of two years.
If you only have one type, consider adding a small instalment loan or line of credit. Just manage it responsibly — this isn't about collecting credit, it's about showing you can use it wisely.
Start now, see results later
Improving your credit score doesn't happen overnight. But with careful planning and responsible habits, you'll be in a much stronger position to secure a mortgage.
Start this process well before you plan to apply — credit improvements can take several months to show up on your report.
A higher credit score can save you thousands of dollars over the life of your mortgage by qualifying you for lower interest rates. So if homeownership is on your radar, now's the time to get your credit in shape.
