What is a Good Minimum Credit Score for a Mortgage in Canada?

By Jaswantee Ravi

For many Canadians, getting approved for a mortgage is a pretty lengthy process. To help save you time, it’s important to know the minimum credit score you’ll need to qualify for a mortgage loan before getting started. Because if you’re looking to borrow money from a bank, your credit score is a major factor in your approval.

First and foremost, banks will look at your credit history to see how likely you are to be able to pay back the loan. Your credit score could be the factor that determines whether or not you’re eligible for a mortgage from specific lenders.

At this point, you’re probably asking yourself, "What’s a good minimum credit score for a mortgage in Canada?" Below we’ll give you a good idea of Canadian mortgage minimum credit score requirements to help you on your way to getting that new home loan. This information is based on the average minimum credit score requirements for five major banks in Canada: Royal Bank of Canada, CIBC, National Bank of Canada, Toronto-Dominion Bank, and Scotiabank.

What is a Credit Score?

Our credit score is not an arbitrary number assigned to us, but rather a number that is built over time. 

Lenders use credit scores as a way to determine whether or not you're likely to pay back any debts. A credit score is based on the information in your credit report and influenced by many different variables. The higher your score, the better. Higher credit scores mean that the borrower is likely to be able to pay back their loan which means it’ll be easier for them to get approved for mortgages, car loans, and credit cards.

A higher score can also impact the interest rate you’re offered. But it’s important to note that certain lenders don't always use credit scores and that you may be able to find loans without a score requirement.

Factors affecting your credit score can include:

• How much debt you have
• How long you've been using credit
• How often you make your payments
• How much new credit you have recently obtained
• The types of credit used (e.g. mortgages, car loans, etc.)

What to Know About Credit Scores

The minimum credit score for insured mortgages (CMHC) is 680, and for banks it’s 600. For uninsured B lenders, the minimum credit score is 550. Finally, for private lenders, there is no minimum credit score.

The interest rates offered for private mortgages are the highest, especially if you have a lower credit score. For uninsured B lenders, the interest rates are also higher than banks. Banks and insured mortgages offer the lowest interest rates.

What is a Good Credit Score for a Mortgage in Canada?

In Canada, credit scores can range between 300 and 900. Typically, a credit score of about 660 is considered good, 752 and above is very good, and anything about 760 is excellent. Credit scores below 600 are considered poor. Any score below that can prove to be an obstacle for you in the mortgage process. In 2021, the average Canadian credit score was 667. 

4 Ways to Boost Your Credit Score

Your credit score is one of the most important things you can control if you want to know whether you're likely to be approved for a loan. It's also one of the easiest things you can improve. There are many ways to increase your credit score, but if you want to boost it fast, you should consider paying off your debts.

1. Review Your Credit Reports

The first step to repairing your credit is to check your credit reports. Depending on the reports that show up, there may be ways to remedy the situation. For example, if the reports show that you have a high balance on a card then you may want to find a bank that will lower your interest rate. You might also want to check the reports for errors or incorrect information.

2. Pay Off Your Credit Card Debt

Paying off your credit card debt may seem like a daunting task, but it's a necessary step to building up your credit, which can help you get a lower interest rate on future purchases. If you pay off your credit card debt, your credit score will increase as you are dramatically lowering your debt amount, which is one of the best ways to raise a credit score.

3. Get On Top of Your Bill Payments

When it comes to your credit score, it’s important to make timely payments and always pay the balance in full. Always keep in mind that if you make a late payment, your credit score might drop. To keep your credit score high, you should be paying your bills on time each month.

4. Keep your Credit Utilization at 30%

Credit utilization is the amount of your credit limit that you're using. For example, if you have a $10,000 limit on one card and don't use any of it, this means that you have a utilization ratio of 0%. On the flip side, if you owe $5,000 to this same card and have a remaining balance of $5,000, your credit utilization is 50%. Ideally, it's advised to keep a credit utilization of 30% or lower to keep an excellent credit score.

The Bottom Line

Credit can be a tricky thing to manage, both in terms of your financial health and your reputation. The first way to raise your credit score is to make sure you're on top of paying your bills on time and in full. You should also try to make as few late payments as possible, as this will lower your credit score.

Credit scores are an important part of your financial well-being. Although credit scores are just a number, they do influence your ability to buy a home, secure a loan, and qualify for other services. A financial advisor can help you understand what these scores are and what you can do to improve them.