Minimum Credit Score for a Mortgage in Canada
What You Should Know
- The minimum credit score required for a mortgage is 680 for banks, but it can go lower for other lenders.
- If you have a bad credit score, B lenders and private lenders are generally your only options, but they can require you to have a large down payment or existing home equity.
- At a minimum, you will need a credit score of 600 or higher to qualify for an insured mortgage, which enables you to make a down payment of less than 20% of the home’s purchase price.
The minimum credit score for a mortgage in Canada varies by lender, but generally speaking, most Canadian banks require a credit score of at least 680. Major banks, and those through mortgage broker channels, are what are called “A lender mortgages”. These are lenders that will get you the best mortgage rates, in exchange for their stricter approval requirements.
Exceptions to minimum credit score requirements can apply, with it being possible to get a mortgage with a credit score of as low as 600 at a bank for insured mortgages. However, some lenders may have different credit score requirements.
You will need a minimum credit score of at least 600 to qualify for an insured mortgage, as per CMHC insurance rules. A mortgage is required to be insured if the down payment is less than 20% of the home’s purchase price. This means that you can’t make a down payment of less than 20% in Canada if your credit score is less than 600. Although you’ll need to pay for mortgage default insurance for an insured mortgage, such as CMHC insurance, insured mortgages typically have lower mortgage interest rates when compared to uninsured mortgages.
Alternative mortgage lenders, such as B lenders, may have a minimum credit score of as low as 500 for uninsured mortgages. B lender mortgages include those by credit unions, monoline lenders, and trust companies.
Private mortgage lenders fill a unique niche, serving as a short-term solution for borrowers unable to secure financing through traditional means, making them a temporary solution for those with bad credit. While private lenders and their bad credit mortgages often have no minimum credit score required to get a mortgage with them, they charge high rates and fees. Borrowers with a low credit score should aim to eventually qualify for a mortgage with a B-lender or bank.
The table below shows the minimum credit score for certain mortgage types. Insured mortgages usually have the lowest mortgage rates on the market. Below, you’ll see the typical difference, or “spread”, between the rates offered for each mortgage type and minimum credit score.
Minimum Credit Scores for a Mortgage
| Mortgage Type | Minimum Credit Score | Typical Mortgage Rate Spread over Insured Rates |
|---|---|---|
| Insured | 600 | - |
| Uninsured (Banks) | 680 | +0.5% |
| Uninsured (B-Lenders) | 500 | +1% |
| Private Lenders | No Minimum | +2.5% to +10% |
Impact of Credit Score on Mortgage Approval
In the jigsaw puzzle of applying for a mortgage, your credit score is one of the first pieces lenders examine. This three-digit figure is a concise representation of your creditworthiness and is calculated using various factors, including your payment history, credit utilization, the length of credit history, new credit, and credit mix. Your score is a demonstration of your financial responsibility and influences both your loan approval and the terms you will be offered.
Lenders equate a higher score with lower risk and tend to be more willing to lend larger amounts for home purchases to those with good or excellent credit. A lower score, however, can dramatically reduce your chances of approval, especially if it falls below the minimum requirements set by the mortgage lender you're applying to.
A credit score too low for mortgage approval doesn't just mean it’s more challenging to get a mortgage, it also potentially means you’ll pay more for it. Interest rates are not one-size-fits-all; higher rates of interest could be required to offset the perceived risk for low credit scores. This increase in interest can accumulate over the years and significantly inflate the cost of your mortgage.
Mortgages With No Credit History 💡
Mortgage lenders accept borrowers without any credit history in certain circumstances. Some major banks, such as TD and CIBC, offer special mortgage programs for new immigrants that have a limited or no Canadian credit history, or for foreign workers on a work permit. Private mortgage lenders may also accept borrowers without any credit history.
If you are over 55 years old, reverse mortgages can be an option if you need extra cash today. Reverse mortgages from Equitable Bank and HomeEquity Bank do not have any minimum credit score requirements. Instead, there is a minimum home value requirement.
Improving Your Credit Score for Mortgage Eligibility
Building a healthy credit history and improving your credit score takes time. Start by checking your credit report and looking for errors. Incorrect information could be dragging your score down. Then, focus on eliminating high credit card balances and making consistent, on-time payments. Check your credit score online for free to make sure it’s heading in the right direction.
If your credit score isn't quite there yet, a mortgage cosigner with a more substantial credit history and higher score could be the solution. Keep in mind that not all lenders accept co-signers, so it's wise to confirm this option before banking on it.