Understanding Credit Utilization

Credit utilization is the percentage of your available revolving credit that you are currently using. It is calculated for each credit card individually, as well as across all of your credit accounts combined. For example, if you have two credit cards with a total credit limit of $10,000 and your combined balance is $2,500, your overall credit utilization rate would be 25%. Credit utilization is an important factor in determining your credit score in Canada, as it helps lenders assess how responsibly you manage your available credit. Keeping your utilization low can positively impact your credit profile.

Your credit score is one of the most critical factors in mortgage approval and determines the interest rate you'll receive. The difference between a 620 and a 760 credit score on a mortgage can translate to tens of thousands of dollars in additional interest paid over the life of the loan. Preparing your credit well before applying can save you significantly.

Conventional mortgages in Canada typically require a minimum credit score of around 650, depending on the lender and the overall strength of the application. CMHC-insured mortgages may also be available with credit scores as low as 650, provided other qualifying criteria are met, such as income stability, debt service ratios, and down payment requirements. For the most competitive conventional mortgage rates, borrowers are generally encouraged to have a credit score of 680 or higher. In most cases, a higher credit score improves your chances of approval and can result in lower interest rates and more affordable monthly payments.

Get your free reports from both bureaus at Equifax.ca or TransUnion.ca. Mortgage lenders typically pull all credit reports and use the middle score. Any errors — incorrect late payments, wrong balances, accounts that don't belong to you — should be disputed immediately. Give the dispute process 30–45 days to resolve before your planned application.