What Is the Minimum Credit Score for a Mortgage in Canada?
There really isn't a single "minimum credit score" to be approved for a mortgage in Canada. That's because different lender types have their own mortgage approval criteria.
Canada's Big Six banks, for example, have much higher credit score requirements than the country's B lenders, whose borrowers often have less glowing credit histories.
So if your credit score is between 500 and 900, you'll probably find a lender in Canada willing to look at your application.
Minimum credit score by mortgage lender type
Getting a mortgage at a major bank: Aim for a 680 credit score
No matter where you apply for a mortgage, the higher your credit score, the better. A good credit score will help you get approved and receive a more favourable mortgage rate.
A credit score of 680 is considered good, and is often assumed to be the lowest credit score major Canadian banks will accept for uninsured mortgages. (Actual credit score requirements are not published by the Big Six.)
There may be a little more leeway when getting an insured mortgage at a bank. The Canada Mortgage and Housing Corporation provides mortgage insurance for borrowers with credit scores as low as 600, but that may be more risk than major banks are willing to take on.
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Getting a mortgage at a non-bank lender: 500 may be good enough
Alternative lenders, because they're regulated differently than major banks, often have lower credit score requirements. Some offer mortgages to borrowers with credit scores below 500.
But there is a tradeoff. Lower credit scores create higher risk for lenders. In exchange for taking on this risk, they charge higher interest rates. And because borrowers with sub-600 credit scores can't qualify for mortgage insurance, alternative lenders require down payments of 20% or more.
Most lenders specializing in bad credit mortgages work exclusively with mortgage brokers, so if your credit score is south of 600, contacting a broker may be the best way to learn about your financing options.
If you have a low credit score or limited credit history but are still intent on buying a home, consider:
Saving more so that you have a larger down payment.
Applying for a joint tenancy mortgage.
Adding a co-signer to your application.
Mortgage lenders that don't check your credit score
If you encounter a mortgage lender advertising "no credit checks", it's likely a small-time private lender, possibly an individual investor.
While larger private lending companies are somewhat regulated in Canada, individual private lenders are not. They are known for offering some of the highest mortgage rates available and charging unusual, sometimes punitive fees. Private lenders are much more likely than banks or credit unions to repossess your home if you fall behind on your mortgage payments.
Always use a mortgage broker if you're interested in arranging private mortgage financing.
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, who can offer a lower interest rate in return. A low score or limited credit history represents higher risk and generally results in higher interest rates.
A higher interest rate impacts both your short- and long-term mortgage costs. Your mortgage payment will be higher, which can impact qualification, and you'll pay more in interest over the course of the mortgage term.
For you, those higher interest rates mean bigger mortgage payments and a steeper total mortgage cost over time.
Other factors mortgage lenders consider
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 home.
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%.
Frequently asked questions
What factors impact your credit score?
What factors impact your credit score?
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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Clay Jarvis
