How to strengthen your credit and set yourself up for mortgage success.

When it comes to buying a home, your credit score plays a bigger role than most people realize. It’s one of the key factors lenders use to decide whether to approve your mortgage—and what interest rate you’ll qualify for.

The good news? Even small improvements to your score can make a big difference.

Why Your Credit Score Matters

Your credit score is essentially your financial reputation. It tells lenders how reliably you’ve managed credit in the past, including credit cards, car loans, and lines of credit.

In Canada, credit scores typically range from 300 to 900. The higher your score, the better your borrowing options.

Here’s a general breakdown:

• 760–900: Excellent – You’ll likely qualify for the best mortgage rates.
• 725–759: Good – You should still get competitive rates.
• 660–724: Fair – You may qualify, but rates could be higher.
• 560–659: Poor – You may need to improve your score before applying.

A strong credit score doesn’t just help you get approved – it can save you thousands over the life of your mortgage through lower interest rates.

How Lenders Evaluate You

When reviewing your mortgage application, lenders look at more than just your credit score. They also consider:

1. Payment history: Have you paid bills and debts on time?
2. Credit utilisation: How much of your available credit are you using? (Ideally under 30%.)
3. Length of credit history: How long have your accounts been open?
4. Types of credit: A mix of loans and revolving credit (like credit cards) can help.
5. Recent inquiries: Too many applications for credit in a short time can raise red flags.

How to Improve Your Credit Score Before Buying

If you’re preparing to buy a home, focus on these simple steps to strengthen your credit:

1. Pay every bill on time. Even one missed payment can hurt your score.
2. Reduce your credit card balances. Try to keep them below 30% of the limit.
3. Avoid new credit applications. Each one triggers a “hard inquiry” that can lower your score.
4. Don’t close old accounts. Long-standing credit helps your score.
5. Check your credit report. You can get a free copy from Equifax or TransUnion to make sure there are no errors.

Improving your score by even 50 to 100 points can open the door to better mortgage rates and more financing options.

Common Credit Mistakes to Avoid

• Co-signing a loan for someone else (their missed payments can affect you).
• Making only minimum payments for long periods.
• Ignoring small debts or collection notices.
• Frequently switching or maxing out credit cards.

No Credit Yet? Here’s a Step-by-Step Plan

Goal: establish a clean, positive credit file and a mix of “revolving” (credit card) and “installment” (loan) history before you apply for a mortgage.

Month 0–1: Set the foundation

1. Open a chequing account at the bank or credit union you’re most likely to use for your mortgage. Enable online banking and e-transfers.
2. Apply for a secured credit card (low limit is fine—$300–$1,000). Use it for one or two small, recurring expenses (e.g., gas, groceries).
3. Set up automatic payments for the secured card: pay in full each month. Never miss a payment.

Month 1–3: Add reliable activity

4. Keep utilization low—aim to use under 30% of your limit at any time (e.g., <$150 on a $500 card).
5. Consider a credit-builder loan from a bank/credit union if available (a small installment loan you repay monthly). Pay it on time; this adds a second trade line and shows you can handle fixed payments.
6. Report on-time rent (if applicable). Ask your landlord if they use a rent-reporting service or consider a third-party service that reports payments to Canadian bureaus. On-time rent can meaningfully help a thin file.

Month 3–6: Strengthen the file

7. Add one more revolving account (optional). If your secured card has been spotless for 3–6 months, you can either:
   • Request a limit increase on the secured card, or
   • Add a second secured card with a different issuer.
     Two revolving accounts + one installment trade line is a healthy mix for a thin file.
8. Avoid hard inquiries you don’t need. Don’t apply for store cards or multiple products in a short window.

Month 6–12: Transition and prepare

9. Graduate to an unsecured card. Many issuers will convert a well-managed secured card after ~6–12 months. Keep the oldest card open to preserve credit history length.
10. Keep perfect payment history. Set calendar reminders and maintain autopay in full. One late payment can set you back.
11. Maintain low balances (again, <30% utilization; <10% is even better on statement day).
12. Pull your credit report (Equifax/TransUnion) to confirm everything is reporting correctly and there are no errors.

New to Canada?

• Ask lenders about New-to-Canada mortgage programs. Strong employment, down payment, and a budding Canadian credit file can offset limited history. Some lenders may also review international credit or alternative proofs (e.g., confirmed rent and utility histories).

Pro Tip

If your credit score needs some work, connect with a mortgage professional early. They can help you understand what score you need for your target loan amount and guide you on specific steps to strengthen your profile before applying.

The Bottom Line

Your credit score is one of the most powerful tools in your home-buying journey. By managing it wisely now, you’ll improve your chances of mortgage approval, secure better rates, and save money over the long term.

When you’re ready to take the next step, the GoWylde Real Estate team can connect you with trusted mortgage professionals and help you move forward with clarity and confidence.