Mortgage Blog

What is your credit score and why is it important?

March 1, 2022 | Posted by: Ronice Harrison

A credit score is a number that shows how likely you are to pay or default on credit. It ranges from 300 to 900. The higher the number, the more creditworthy lenders deem you.

Your credit history determines your credit score.

In turn, your credit score affects various aspects of your financial life. Read on to find out more.

PLUS, Read our mortgage guide for first-time homebuyers in Canada.

Why Are Credit Scores Important?

Credit Scores Affect Your Access to Mortgages

Mortgage lenders use your credit scores to determine how likely you are to default on your mortgage payments before they approve your mortgage. They may deem you too high a risk if you have bad credit scores.

Your scores determine the interest rate at which your mortgage is approved. Better credit scores translate to a lower monthly mortgage payment, whereas poor scores lead to a higher amount. Depending on how bad your score is, the mortgage lender may deny your application altogether.

Credit scores also affect renters because landlords use your scores to determine whether to rent you a home. Landlords consider tenants debtors, so they want to know if they will honor their debt.

Credit Scores Impact Your Home Ownership

This may come as a surprise, but your credit scores may impact your access to utilities. Companies that provide these services argue that they lend you one month's worth of utilities. For that reason, they need to check your scores to see if you'll pay. So your scores may affect your ability to access water, electricity, cable, and so on.

Your history of paying bills affects your credit score. Lenders, landlords, utility companies, and employers use this score to determine how financially responsible you are. Always keep your credit score in mind when making financial decisions, as your score directly or indirectly impacts your quality of life.

How Credit Scores Work

In Canada, your credit score is a number between 300 and 900 assigned to you by a credit bureau – Canada’s two major credit bureaus are Equifax and TransUnion. Here’s an example of how your credit score could affect your mortgage interest rates and monthly mortgage payment.

These rates are higher than what you’ll actually find today, but they help to show the relationship between credit and interest rates, and your mortgage payments over time.


Credit Score

Mortgage Rate

Monthly Payment*

Major Banks – Prime Institutional Lenders




Bad Credit Institutional Lenders




Private Lenders




*Monthly payment estimate for a 25-year loan on a $500,000 home with a 5% down payment.

How to Check Your Credit Score

The best way to check your credit score is to go directly to the source and order your credit score and credit report (which is a detailed accounting of your credit history) from Equifax or TransUnion

Canadians can request a free copy of your credit report every 12 months from Equifax and Transunion with no impact on your credit score. You can order the report by phone, email and online.

How to Improve Credit Scores

As we saw in the table above, a higher credit score is beneficial because it helps you secure a lower mortgage rate, which results in lower monthly mortgage payments.

If you’ve checked your credit score and it’s too low to qualify for a mortgage from the big banks (usually above 660) you may want to spend some time improving your credit score before applying for a mortgage.

Here are our top tips for improving your credit score:

    • Pay your bills on time: Never miss a monthly payment on any of your bills, including debt payments, utilities, even your cell phone bill. If you can’t pay the bill in full, don’t ignore it, as that will just cause it to go into delinquency, harming your credit score. Instead, contact your provider about a payment plan.
    • Stay under your credit limit: Try not to use more than 30% of your available credit limit on your credit cards or lines of credit. This shows credit reporting agencies that you are a responsible spender and not over-extended.
    • Don’t apply for too much new credit: Don’t apply for too many credit cards, as this can be a red flag to credit reporting agencies that you need cash fast.
    • Keep your oldest account: The length of your credit history matters. Canceling old credit cards removes them from your file and shortens your credit history.
    • Consider keeping your oldest credit card open – even if you don’t use it – to maximize the length of your credit history.

If you apply these tips to your finances, you should see your credit score start to increase after a few months.

If you need to purchase a home before you qualify for an A lender mortgage, you can still apply for a mortgage from a trust company or private lender!

Learn how to get a bad credit mortgage in Canada with AQRE Lending.

The bottom line on credit scores...

Building a good credit history is important for your financial health. If you ever want to borrow money to purchase a house, a good credit score can mean the difference between your loan being approved or denied.

But, even for Canadians that have low credit, or have been turned down by the major banks, mortgage lending options do exist! 

So if you don't want to wait to improve your credit, learn about the options for bad credit loans in Canada, and apply today for a mortgage with AQRE Lending.

Low down payment, poor credit, no problem. AQRE Lending mortgage brokers can help all Canadians secure the mortgage they need.

It takes just 2 minutes to fill out our pre-approval form and see how much you can borrow. So what are you waiting for?

Get Pre-Approved Today!

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