When you apply for a mortgage in Canada, your credit score is one of the first things lenders check. A good credit score can mean the difference between getting approved for a loan and being denied, and it directly impacts the interest rates you’re offered. Here’s how your credit score influences your mortgage application:
- Impact on Interest Rates:
Your credit score is a key determinant of the interest rate on your mortgage. A higher score (typically above 700) signals to lenders that you are a responsible borrower, leading to lower interest rates. This can save you a significant amount over the life of your mortgage. In contrast, a lower score can result in higher interest rates, making your mortgage more expensive in the long run. - What Lenders Look For:
Lenders use your credit score as part of a larger assessment of your financial health. Along with your credit score, they’ll consider:- Your debt-to-income ratio (DTI): How much debt you carry compared to your income.
- Employment history: A stable job history can improve your chances of approval.
- Down payment: A larger down payment can offset a lower credit score and help you secure better terms.
- How Your Credit Score Affects Your Approval:
Generally, a score above 680 is considered good for getting a mortgage in Canada. However, those with scores below this may face higher rates or even difficulty securing approval, particularly for larger loans. To maximize your approval chances, focus on improving your credit score before applying.
