Minimum Credit Score For Mortgage Approval

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What is the Minimum Credit Score to Get Mortgage Approval in Canada?

Getting a mortgage approval these days can be difficult, especially with escalating real estate prices. For instance, In Toronto, you will be paying CAD 820,000 for a home, which is CAD 100,000 more than the average rate from the previous year. Unless you are Mr Scrooge and swimming in a pool of cash, that is a lot of money needed to purchase a house.

Moreover, a lot goes into getting a mortgage. Before deciding whether to approve a mortgage application, lenders assess several variables such as a sizeable down payment, good income and, of course, credit score. Thus, before applying for a mortgage, you must know the minimum credit score for a mortgage in Canada to get easy approval.

High credit scores will help you get easy mortgage approval and a favourable interest rate. As credit scores are such an essential part of the financing process, it's no surprise that we get a lot of questions regarding what constitutes a good credit score for mortgage approval. There's a lot to know about credit scores, and figuring out where to start might be difficult. Considering the importance of credit scores in the mortgage sector, we've condensed everything you need to know about credit scores in this guide.

Mortgage Calculators

What is Credit Score and Why Do We Need it?

A credit score is a number that helps lenders determine the borrower's credibility. Ranging from 300 to 850, this number is the foremost factor determining a person's creditworthiness. A borrower's credit score enhances their credibility from a potential lender’s perspective. A credit score is calculated using information from your credit history, such as the number of bank accounts, the total amount of debt you owe, and your repayment history, among other things. Lenders use credit scores to evaluate the probability that an individual will repay mortgages promptly.

Credit scores are essential regardless of what financial service you are looking forward to securing. Everything revolves around a credit score, from buying a house to starting your own business. Your credit score may be used by potential employers, landlords, and utility companies to assess whether or not to provide you with the requested service. Every financial assistance is associated with this three-digit number.

The higher your credit score, the more money you can borrow and the lower your monthly payments will be. A score of less than 620 is classified as "high risk." Bankruptcy, missed repayments, late fees and collection agency referrals can lower your credit score. Such information can stay on your credit report for up to seven years. It is essential to make sure you maintain a good credit score to facilitate easy approval for your mortgage request.

What is the Minimum Credit Score for a Mortgage?

The minimum credit score for a mortgage in Canada is 640. A score between 620 and 680 will suffice, depending on the lender. However, you should note that the credit score required to obtain a mortgage also depends on several other criteria relating to the borrower. A mortgage applicant with a high income and low debt may be able to secure a mortgage at a lower credit score contrary, to a borrower with a low income and a large debt load.

The credit score necessary for mortgage approval will also be influenced by the mortgage size and amortisation sought. For example, a larger mortgage amount might be regarded as a riskier venture by lenders; as a result, it will seek a higher credit score. During the mortgage valuation and approval process, borrowers will also be subjected to a stress test.

Applicants for a mortgage in Canada must demonstrate to their lender that they will be able to afford the mortgage payments in the future, even if interest rates increase.

How do Your Credit Scores Impact Your Mortgage?

The credit score has a significant impact on a mortgage approval. The impact, however, may differ depending on the applicant's credit score.

Here's how your credit score affects your mortgage:

Credit Score Impact on Mortgage
760 or above A credit score of 760 or more is considered outstanding. You should expect easy approval and get the best interest rates if you have good credit.
725 to 759 Credit scores falling in the range of 725 to 759 are good as per a lender’s perspective. Applicants can expect quick approvals and favourable interest rates if they have a score in this range.
660 to 724 Credit scores in the range of 660 to 724 are also considered good scores. Here too, you can expect hassle-free quick approvals. However, possibilities are you may not secure the same rates as offered to the applicants of the above-mentioned categories.
560 to 659 Fair credit ratings range from 560 to 659 points. The minimum credit score for a mortgage in Canada is 650 to 680, which lies between fair and good credit. You may find it difficult to qualify for a mortgage with a bank if your credit score is below 620. You'll also have difficulty qualifying for the finest prices on the market.
300 to 559 Credit scores falling between 300 to 559 frames are said to be poor. The lenders consider applicants with a poor credit score to be high-risk borrowers, making mortgage approval a tedious task. You will have to count on private lenders resulting in higher interest rates.

Things Considered by Lenders for Mortgage Approval

As previously stated, credit scores are not the only element lenders consider when deciding whether to approve your application. They also want to see that you have a good track record of debt management. This means that, in addition to your credit ratings, lenders will evaluate your payment history by pulling a copy of your repayment history or credit report. Even if your credit score is above 600, and your lender figures out a history of debt along with some payment issues, it may raise some red flags and prompt them to rethink your creditworthiness.

Other aspects that lenders count on before mortgage approval includes:

  • Applicant’s annual income
  • Employment history of the applicant
  • General expenses
  • Amount applicant is planning to borrow
  • Ongoing debts
  • Amortisation period

For all potential mortgage applicants and borrowers, this is where the new stress-test will come into role play. To qualify, you must demonstrate to your lender that you can make your mortgage payments in the future.

GDS Ratio

The lender will also calculate the applicant's monthly housing costs, which is referred to as the gross debt service ratio. The ratio is made up of the following ingredients:

  • Potential property taxes and mortgage payments
  • Possible cost associated with heating along with other utilities
  • 50% of condominium fees, this will be considered if you are planning to purchase a condo

TDS Ratio

After examining your debt load in total, the lender will put forward a total debt service ratio or TDS ratio. It comprises:

  • Credit card payments
  • Ongoing car payments
  • Lines of credit (LOC)
  • Payments associated with spouse or child support
  • Student loans and other debts

Can We Get A Mortgage With Low Credit?

The above-mentioned minimal credit scores for mortgage approval mainly apply to traditional lenders, such as large banks and government institutions. These traditional lenders are usually fairly strict regarding mortgage approval standards, including credit ratings.

Thankfully, there are many alternatives for borrowers with poor credit scores who want to finance a house through a mortgage. The presence of credit unions, trust firms and subprime lenders makes it possible for the borrowers to avail of a mortgage when they cannot obtain the same through their banks due to poor credit scores. These providers frequently deal with clients who could be considered riskier by traditional lenders.

Risks Associated with Bad Credit Mortgage Lender

It should be highlighted that if you apply for a mortgage with one of the discussed lenders under a bad credit condition, you would certainly pay a higher interest contrary to the applicants with better credit scores and conventional lenders.

That's why, before applying for a mortgage, you should consider improving your credit score. Time invested in improving your credit score is worth it, as you will have an easier time getting mortgage approval and securing a lower rate. All these factors will lower the cost of your mortgage.

How To Increase Your Credit Score Before Applying for a Mortgage?

A decent credit score is one of the most significant considerations when applying for a mortgage. It's also used to determine the interest rate you'll be charged, so having a good credit score might save you hundreds of dollars on your mortgage. As a result, getting your credit ratings in the greatest possible shape is advisable before applying to any lender. Here are a few basic steps you may take to enhance your credit score.

  • Make complete and timely bill payments
  • Clear your dues and don't keep unpaid debts for long
  • Never go beyond 30% of your credit card limit
  • Don’t apply for multiple credit or debit cards in a short time frame
  • Review your credit report to determine mistakes or inappropriate entries
  • Count on credit building products including a secured credit card

It's likely that your initial mortgage application will be denied if your credit scores fall below your lender's requirements, but don't quit trying. Before applying for a mortgage with any lender, you can increase your chances by raising your credit ratings as much as possible. This will not only improve your chances of being approved, but it will also help you get better interest rates.

Remember to do your homework before applying for a mortgage to discover the best lender for your individual financial needs. Regardless of your credit, You can find numerous third-party licensed mortgage specialists that can fulfil your needs.


Ans: To qualify for a mortgage, you'll need a credit score of somewhere between 620 and 680 from most lenders. However, you may be able to get a mortgage with a 600 credit score if you work with a private mortgage provider. However, private lenders frequently demand extremely high-interest rates, which can significantly raise the mortgage cost.

Ans: Yes, you can get a mortgage with bad credit in Canada. However, the possibilities of securing a mortgage from conventional lenders are too less, instead, you will need to count on a private mortgage lender. Lenders with more lenient rules can be the foremost choice when you have a bad credit score. While these lenders frequently accept clients with all sorts of credit, their interest rates are substantially higher.

Ans: Pre-approvals for mortgages entail a credit check by your lender. When they offer a pre-approval, a "hard inquiry" is made, which can have a negative impact on the credit report. Multiple credit checks performed by mortgage lenders in a short time frame, i.e. between 7 and 45 days, are usually treated as a single hard inquiry.

Ans: The sort of mortgage you wish to employ will determine the credit score requirements. A conventional mortgage seeks a 620 score as a minimum credit score. It clocks in at a score of 580 for an FHA loan, whereas it clocks at 580 or above for a VA loan.

Ans: There is no set minimum FICO score on qualifying for an FHA loan with a down payment of 10% or higher. On the other hand, FHA loans are provided by private lenders, who typically specify the minimum limit for the credit score in advance. Quicken Loans, for example, requires a minimum FICO score of 580 to qualify.

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Table of Content

  • What is the Minimum Credit Score to Get Mortgage Approval in Canada?
  • What is Credit Score and Why Do We Need it?
  • What is the Minimum Credit Score for a Mortgage?
  • How do Your Credit Scores Impact Your Mortgage?
  • Things Considered by Lenders for Mortgage Approval
  • Can We Get A Mortgage With Low Credit?
  • How To Increase Your Credit Score Before Applying for a Mortgage?