What is the minimum credit score to get a mortgage in Canada
By Arthur Dubois | 06 Jul 2023 |

If you’re planning on buying a home in Canada, one of the most important factors to consider is your credit score. This three-digit number can have a big impact on whether you’ll be approved for a mortgage, as well as the interest rate you’ll be offered. But what exactly is the minimum credit score needed to get a mortgage in Canada? Let’s take a closer look.
Minimum Credit Score Requirements for Different Mortgage Types
Now that you have a better understanding of credit scores in Canada, let’s take a closer look at the minimum credit score requirements for different types of mortgages. Keep in mind that these are general guidelines, and minimum requirements can vary between lenders.
Conventional Mortgages
A conventional mortgage is a type of mortgage that is not guaranteed or insured by the government. For a conventional mortgage, most lenders in Canada will require a minimum credit score of 680 and a minimum down payment of 20%. However, it is possible, although harder, to get a conventional mortgage with a credit score ranging from 600 to 679. However, the interest rates offered might be higher.
It’s important to note that having a credit score of 680 does not necessarily mean that you will be approved for a conventional mortgage with that score. Lenders will also take into account other factors, such as your income, employment history, and debt-to-income ratio, when deciding whether to approve you for a mortgage.
If you have a credit score below 600, you won’t qualify for a conventional mortgage. In this case, you may want to consider other options, such as getting a subprime mortgage, getting a guarantor or working to improve your credit score before applying for a mortgage.
Government-Backed Mortgages
The Canada Mortgage and Housing Corporation (CMHC) offers government-backed mortgages that are insured and require a minimum down payment of only 5%. While the CMHC is the most known provider of such mortgages, there are also two other private mortgage insurance providers called Sagen and Canada Guaranty. For this type of mortgage, the minimum credit score required is 680.
Government-backed mortgages can be a good option for homebuyers who cannot provide a 20% cash down. However, it’s important to be aware of the additional costs associated with these types of mortgages, such as mortgage insurance premiums, that you can calculate using this mortgage default insurance calculator.
Subprime Mortgages
In Canada, subprime mortgages refer to home loans extended to borrowers with lower credit scores, typically around 600 or below. These mortgages are designed to assist individuals who may have difficulty qualifying for conventional loans due to their credit history or financial circumstances. However, subprime mortgages in Canada generally come with higher interest rates compared to prime mortgages.
While subprime mortgages can provide opportunities for homeownership to individuals who would otherwise struggle to secure financing, it is important for borrowers to carefully consider the terms and conditions. They should be aware that higher interest rates can significantly impact the overall cost of the mortgage, making it crucial to weigh the benefits and potential drawbacks before committing to such a loan.
Factors Affecting Mortgage Approval Beyond Credit Scores
While your credit score is an important factor in getting approved for a mortgage, it’s not the only factor. Here are a few other factors that lenders will consider:
Debt-to-Income Ratio
Your debt-to-income ratio is a measure of how much debt you have in relation to your income. Lenders will typically want to see a debt-to-income ratio of no more than 41%, meaning your monthly debts (such as credit card payments, car loans, and other mortgages) should not exceed 41% of your gross monthly income.
It’s important to note that lenders may also consider your residual income, which is the money you have left over each month after paying your bills. This helps to ensure that you have enough money to cover unexpected expenses and emergencies, which can impact your ability to make your mortgage payments on time.
Employment History and Stability
Lenders will also want to see a stable employment history and a regular source of income. This can include full-time employment, self-employment, or other sources of income such as investments or rental income.
If you’re self-employed, lenders may require additional documentation to verify your income, such as tax returns and profit and loss statements. It’s important to have these documents ready and organized to help streamline the mortgage approval process.
Down Payment Size
The size of your down payment can also affect your mortgage approval chances. A larger down payment can help to offset a lower credit score or other potential issues, such as a high debt-to-income ratio.
Secured credit card
In addition, a larger down payment can also help to reduce your monthly mortgage payments and the amount of interest you’ll pay over the life of the loan. This can save you thousands of dollars in the long run.
It’s important to note that some lenders may require a minimum down payment amount, which can vary depending on the type of loan you’re applying for. For example, a conventional loan may require a down payment of at least 20%, while a loan from the Canada Mortgage and Housing Corporation (CMHC) may require a down payment of as little as 5%.
Alternative Mortgage Options for Low Credit Scores
If you’re struggling to get approved for a mortgage due to a low credit score, don’t lose hope. While traditional lenders may not be willing to work with you, there are a few alternative options you can consider.
First, it’s important to understand why having a low credit score can make it difficult to get approved for a mortgage. Lenders use credit scores to determine how likely you are to repay your loan. If you have a low score, it may indicate that you have a history of missing payments or defaulting on loans, which makes you a higher risk borrower.
However, there are lenders who specialize in working with borrowers who have lower credit scores. While these lenders may be willing to work with you, keep in mind that their loans may come with higher interest rates and other fees.
Co-Signers and Guarantors
Another option is to have a co-signer or guarantor on your mortgage. This person will be responsible for repaying the loan if you’re unable to. Having a co-signer or guarantor with a higher credit score can help offset the risk of lending to someone with a lower score.
However, it’s important to note that having a co-signer or guarantor can be a risky option for both parties. If you default on the loan, your co-signer or guarantor will be responsible for repaying it. Make sure you fully understand the consequences before going this route.
Private Lenders
One option is to work with a private lender. Private lenders are companies or individuals that lend money for a variety of purposes, including mortgages. Because they are not bound by the same regulations as traditional lenders, they may be more willing to work with borrowers who have lower credit scores.
However, it’s important to do your research before working with a private lender. Some private lenders may charge exorbitant interest rates or require a larger down payment. Another thing to keep in mind is that loans from private lenders are typically short in length. A common strategy is to get a loan from a private lender, and then refinance the loan with one of the best banks for mortgages in Canada after a year or so.
Rent-to-Own Programs
In Canada, a rent-to-own program offers an alternative path to homeownership for individuals who may not qualify for traditional mortgages or face financial constraints. It typically involves renting a property for a predetermined period, during which a portion of the monthly rent is allocated towards building equity. At the end of the agreed-upon term, the tenant has the option to purchase the property at a predetermined price.
This arrangement provides tenants with an opportunity to improve their creditworthiness, save for a down payment, and test the property before committing to a full purchase, while allowing landlords to generate income and potentially secure a future sale.
Some notable rent-to-own providers in the Ontario region include JAAG Properties and HOS Financial, who offer a down payment of as low as 3% and do not require a high credit score.
Understanding Credit Scores in Canada
Before we dive into minimum credit score requirements for mortgages in Canada, it’s important to understand what credit scores are and how they’re calculated. Credit scores are a numerical representation of a person’s creditworthiness, based on a range of factors including payment history, amounts owed, length of credit history, and new credit inquiries.
The credit score is a three-digit number that ranges between 300 and 900, with the higher score indicating better creditworthiness. The credit score is calculated by credit reporting agencies such as Equifax and TransUnion, but there are other ways to get your credit score for free in Canada. These agencies gather information about your credit history from various sources such as banks, credit card companies, and other financial institutions.
The credit reporting agencies use this information to calculate your credit score, which is based on several factors such as payment history, amounts owed, length of credit history, and new credit inquiries. Payment history is the most important factor used in calculating your credit score, and it accounts for 35% of your score. The amounts owed on credit accounts make up 30% of your credit score, while the length of your credit history accounts for 15%. New credit inquiries and types of credit used make up the remaining 20% of your credit score.
How Credit Scores are Calculated
The credit reporting agencies use complex algorithms to calculate your credit score. They take into account several factors, including:
- The number of credit accounts you have
- Your payment history
- The amount of debt you owe
- The length of your credit history
- The types of credit you use
- New credit inquiries
Each factor is given a different weight, depending on its importance in determining your creditworthiness. For example, payment history is given the highest weight, while new credit inquiries are given the lowest weight.
Credit Score Ranges and their Meanings
The following are the credit score ranges and their meanings in Canada:
- 300-599: Poor
- 600-649: Fair
- 650-699: Good
- 700-749: Very good
- 750-900: Excellent
Keep in mind that these ranges can vary slightly between credit reporting agencies, and lenders may have different standards for what they consider a good or bad credit score. However, in general, a credit score of 650 or higher is considered a good score, while a score below 600 is considered poor.
It’s important to maintain a good credit score, as it can affect your ability to obtain credit in the future. A good credit score can also result in lower interest rates on loans and credit cards, which can save you money in the long run.
How to Improve Your Credit Score for Mortgage Approval
If you’re in the market for a new home, having a good credit score is crucial to securing a mortgage with favorable terms. Your credit score is a reflection of your creditworthiness and lenders use it to determine your ability to repay a loan. If your credit score is less than ideal, don’t worry, there are steps you can take to improve your credit score.
Paying Bills on Time
One of the most important things you can do to improve your credit score is to make sure you’re paying your bills on time. Late payments can have a big negative impact on your score. Set up automatic payments or reminders to ensure you don’t miss a payment. If you’re struggling to make payments, contact your creditors to discuss options such as payment plans or deferments.
Reducing Credit Utilization
Having high balances on your credit cards can also hurt your credit score. Aim to keep your credit utilization (the percentage of your available credit that you’re using) below 30%. This shows lenders that you’re responsible with your credit and can manage your debt effectively. If you have high balances, consider paying them down or transferring the balance to a card with a lower interest rate.
Building a Strong Credit History
Another way to improve your credit score is to build a strong credit history over time. This can include using credit responsibly and consistently over a period of years, paying off debts, and avoiding new credit inquiries unless necessary. Lenders like to see a long history of responsible credit use, so it’s important to start building your credit early and maintaining good habits.
A secured credit card is a practical solution for those with low credit scores who might struggle to get a regular card. These cards require a deposit that serves as your credit limit. Despite this difference, they function like regular credit cards and, crucially, their usage gets reported to credit bureaus. By consistently making full, on-time payments with a secured card, you can exhibit financial responsibility, gradually enhancing your credit score.
Secured credit card
Minimum credit score to get a mortgage: The Bottom Line
While your credit score is an important factor in getting approved for a mortgage in Canada, it’s not the only factor. If you’re struggling to get approved for a mortgage due to a low credit score, there are alternative options you can consider, such as private lenders or rent-to-own programs. Additionally, taking steps to improve your credit score over time can help you get approved for a mortgage with better terms and interest rates.
FAQs About Credit Scores and Mortgages in Canada
Even with a low credit score, getting a mortgage is still possible, but it may require a different approach. You might consider buying a property jointly with someone who has a better credit score or getting a guarantor who can cover your loan repayments if you’re unable to. Opting for a subprime mortgage, designed for borrowers with less stellar credit scores, is another viable solution, but bear in mind these often come with higher interest rates. Increasing the size of your down payment can also make lenders more willing to grant a mortgage despite a lower credit score.
Improving your credit score can take time, but it’s possible to raise your credit score substantially in as little as a few months with the right steps. One of the first steps you can take to improve your credit score is to make sure you’re making all of your payments on time. Late payments can have a negative impact on your credit score, so it’s important to stay current on all of your bills. Another way to improve your credit score is to pay down any outstanding debts you have. This can help lower your credit utilization ratio, which is an important factor in determining your credit score. If you have a limited credit history, you may also want to consider opening a secured credit card. This type of credit card requires you to put down a deposit, which then becomes your credit limit. By using a secured credit card responsibly, you can start building a positive credit history.
Indeed, mortgage pre-approval can cause a slight drop in your credit score in Canada. This happens because lenders perform a hard credit check during the pre-approval process, leading to a small, temporary dip in your credit score. Despite this, the impact is temporary and your score will gradually improve with regular and responsible credit usage.
When a lender conducts a hard credit check for a mortgage pre-approval, it could have a small impact on your credit score. However, in Canada, credit rating agencies understand that consumers shop around for the best mortgage rates. As such, multiple mortgage inquiries within a 14 to 45 days window are typically treated as a single inquiry for scoring purposes, minimizing the effect on your credit score. Still, it’s best to limit hard inquiries as much as possible.
Yes, making your mortgage payments on time can help increase your credit score. Consistent, on-time mortgage payments show lenders that you’re a responsible borrower, which can positively impact your credit score over time. However, it’s essential to note that late or missed payments can significantly harm your credit score. Maintaining a good payment history is one of the most significant factors credit bureaus consider when calculating your credit score.
Securing a mortgage with a 400 credit score is extremely challenging in Canada, as this is considered a very poor credit rating. Traditional lenders are highly unlikely to approve a mortgage application with such a low score. However, there are alternative paths you can consider. One of these is to have a guarantor, someone with a higher credit score who agrees to pay back the loan if you cannot. Additionally, you might consider obtaining a secured credit card. Secured credit cards are designed for individuals with poor credit or no credit history, and they require a deposit that serves as your credit limit. Using a secured card responsibly, by making small purchases and paying off the balance in full each month, can help improve your credit score over time. Nonetheless, improving your credit score significantly enough to be approved for a mortgage involves a consistent, long-term commitment to credit-building strategies such as paying bills on time, reducing outstanding debts, and maintaining a low credit utilization rate.
Securing a mortgage with a 500 credit score is quite difficult in Canada. A score this low is considered poor, and most traditional lenders will likely decline your mortgage application. However, you might find opportunities with subprime lenders willing to offer loans to low-credit-score borrowers. Another option might be seeking a co-signer or guarantor with a strong credit score to strengthen your application. Regardless, consider focusing on improving your credit score for better chances of approval and more favourable loan terms.
While it’s challenging, it is not impossible to secure a mortgage with a credit score of 550. Traditional lenders might deny your application, but you may have options with certain subprime lenders. These lenders offer loans to borrowers with low credit scores, though often at higher interest rates. Keep in mind, though, that improving your credit score will likely result in more favourable lending terms.
Yes, obtaining a conventional mortgage with a 600 credit score is a possibility in Canada, although it’s likely to be more challenging. Your options may be more limited and the terms less favorable due to this subprime credit score. Importantly, you won’t qualify for a mortgage insured by the Canada Mortgage and Housing Corporation (CMHC), which requires a minimum credit score of 680. As such, to secure a conventional mortgage, you’ll need to provide a minimum of 20% cash down payment.
In Canada, a credit score of 640 is on the edge of what’s typically required for a conventional mortgage, and while it might be possible to obtain a mortgage with this score, it could be more challenging. Some lenders may approve you for a mortgage, but you may face higher interest rates or more stringent conditions. In addition, the Canada Mortgage and Housing Corporation (CMHC), requires a minimum credit score of 680 for mortgage default insurance. As a result, you won’t be able to qualify for a mortgage unless you have a down payment of 20% or more.
Absolutely, with a credit score of 650, you can qualify for a mortgage in Canada. While this score is not yet in the “good” range, it’s sufficiently close to allow for a wider range of mortgage options. Mortgages insured by the CMHC aren’t accessible as they require a minimum score of 680. Despite this, other lenders may offer reasonable terms and interest rates, allowing you to secure a mortgage.
Yes, it’s possible to get a mortgage with a credit score of 670. While it falls slightly short of the 680 many lenders prefer, you may still qualify for certain mortgage products. However, improving your score by just a few points to reach the 680 mark could potentially broaden your options and result in more favourable interest rates.
Yes, you can often secure a mortgage with a credit score of 680. Many lenders in Canada consider 680 to be the minimum score for conventional mortgage approval. At this level, you’re also likely eligible for a mortgage insured by the Canada Mortgage and Housing Corporation (CMHC), which requires a down payment of as little as 5%. As always, other factors like income, employment history, and debt-to-income ratio also play a role in mortgage approval.
A credit score of 700 is generally considered good and will likely make you eligible for a variety of mortgage options in Canada. Lenders see borrowers with this credit score as low risk, which can lead to approval for a mortgage with favorable terms, including lower interest rates. However, bear in mind that while a 700 credit score increases your chances of mortgage approval, lenders also look at other factors, such as income, employment history, and debt-to-income ratio, when making their decision.
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