How Your Credit Score Affects Your Mortgage Rate in Canada

It takes credit to build credit — a phrase most of us have heard early in adulthood. Whether it was when we applied for our first credit card or tried to get a loan and discovered we didn’t have a credit score, the message is clear: building credit is essential.

But while it takes credit to build credit, it can also take credit to destroy it. So what exactly is “credit,” and how does your credit score impact your mortgage rate in Canada? Let’s break it down.

What Is Credit?

Credit is essentially a system used by lenders to measure how likely you are to repay borrowed money. The higher your score, the “safer” you appear to lenders. The lower your score, the “riskier” you seem — and that directly impacts the interest rate you’ll be offered.

The most common way to start building credit is through a credit card. While credit cards often come with high interest rates, using them responsibly — and paying your balance on time — shows lenders that you’re capable of managing debt. This, in turn, helps raise your credit score.

✅ Tips for Building Good Credit:

·         Make payments on time, every time.

·         Keep your balances low (ideally under 30% of your limit).

·         Avoid opening too many new accounts in a short time.

Does Paying Rent Help Your Credit Score?

Yes — it can! For Canadians, consistent rent payment reporting can help demonstrate financial responsibility.

There are now several rent-reporting programs that allow tenants to use their monthly rent payments to build their credit history. By verifying your rent through your landlord or through a participating platform, you can establish a positive payment record — often for as little as $5 per month.

This can make a big difference when applying for a mortgage, as lenders can see you’ve been managing regular payments similar to a mortgage.

What If You Have Student Loan Debt?

Having student loans doesn’t automatically hurt your credit — as long as you’re making payments on time. However, debt levels can affect how much you qualify for when applying for a mortgage.

Here are a few strategies to improve your affordability:

·         Pay off other debts first — especially high-interest credit cards.

·         Restructure your student loan to lower monthly payments (though you may pay more interest long-term).

·         Maintain consistent payments to show responsibility.

·         Get pre-approved for a mortgage to know exactly what you can afford.

Understanding Credit Score Ranges in Canada

In Canada, credit scores range from 300 to 900. Here’s a general guide:

Your score is calculated based on several factors:

·         Payment history (most important)

·         Credit utilization (how much of your available credit you use)

·         Credit history length

·         Public records

·         Number of recent credit inquiries

Does Your Credit Score Affect Your Mortgage Rate?

Absolutely. Your mortgage rate and your credit score are directly linked. The higher your score, the better the rate — and the lower your long-term costs.

Here’s how different credit score ranges typically affect mortgage interest rates in Canada:

What If Your Credit Score Is Below 680?

In 2021, the CMHC lowered the minimum credit score for insured mortgages from 680 to 600 — making it easier for some buyers to qualify. However, this doesn’t guarantee you’ll receive the best rates.

Borrowers with scores near 600 are often considered non-prime, meaning their rates may be 2% higher than those with prime credit. With a score below 600, most banks won’t approve a mortgage — though B-lenders and private lenders might, often at much higher rates and additional fees.

How Much Difference Can a Credit Score Make?

A higher credit score can save you tens of thousands of dollars over the life of your mortgage.

For example:
On a $500,000 mortgage with a 25-year term, even a 1% difference in your interest rate could mean paying over $100,000 more in interest.

That’s why improving your credit score — even by a few points — can have a huge financial impact.

The Bottom Line

Your credit score plays a major role in determining the mortgage rate you’ll qualify for. A strong credit profile shows lenders that you’re financially responsible, increasing your chances of securing the best rate possible.

If you’re planning to buy a home soon, now’s the time to check your credit score, address any issues, and start improving it.

When you’re ready, connect with an experienced RE/MAX President Realty agent who can guide you through your mortgage and home-buying journey with confidence.

👉 Click HERE to find a RE/MAX President agent near you.