A credit score is the magic number used to give you the best deal on some of the most important purchases in your life, like a home. Keep a good credit score and you can secure an affordable mortgage interest rate. Let’s review how credit scores ultimately determine the interest rate Canadians pay on their mortgage.


Low score? Expect a higher rate.

That’s if you are even approved to begin with. Potential borrowers seeking a mortgage with a low credit score (ranging from poor-to-fair) may find it challenging to find a lender that will even approve them. Shopping around for lenders can also be risky if you are trying to keep a strong credit score, as reaching out to a lender and inquiring about pre-approval for a mortgage is classified as a ‘hard inquiry,’ meaning that your credit score will temporarily drop and stay on the credit report for up to 36-months. The good news? Equifax Canada states that multiple inquiries occurring between 14 – 45 days will count as only one inquiry.

If you have a low score and are approved, you’re going to pay a much higher rate. This could equate to hundreds of extra dollars per month on your mortgage. Long story short, your credit score matters.

Higher the risk, the more you must compensate monthly.

Look, lenders are not giving out mortgages just to do you a solid: they aim to make money on every mortgage application they approve. If you pose as a higher risk, clearly they will want to make the deal worth their time while minimizing the risk to their bottom line. Per the life of the loan, you will be looking at tens of thousands of dollars extra you have to pay thanks to higher interest rates – all because your credit score isn’t where it needs to be. It’s a bummer, but at the end of the day a mortgage is nothing less than a business transaction.

Know your credit score before house hunting

Even if you don’t plan to house hunt this year or even next – you need to keep tabs on your credit score now in order to prepare for the day when you will hunt for a home. If you have no credit, obtain a credit card (your bank is a great place to start) and put small amounts on the card monthly. Pay the full balance before each month’s due date, and over time you will build a solid credit score that you can be proud of.


If too much debt is the problem, create a plan for paying off your debts months before you have an inkling that you will be looking for a home. It’s imperative to ensure your credit score is good-to-great (e.g. 700 and above is a great first goal) before looking for a mortgage to save time, minimize hard inquiries, and most importantly, to get the absolute best interest rate for your mortgage. Undoubtedly, it will make the difference between getting a good rate and paying a small fortune in interest rates during the life of the loan.