What Credit Score Is Needed To Buy A House? (2024)

Your credit score is a number between 300 and 900. Each lender will have its own criteria for what credit score is needed to qualify for a mortgage and even what is considered a “good” score.

However, as a general rule of thumb, you’ll need at least a 680 credit score to qualify with a traditional lender, such as one of the Big Six Banks. With a CMHC-insured mortgage(that is, a mortgage with less than 20% down payment) the minimum credit score is 600.

The higher your credit score, the more likely you are to both qualify for a mortgage and for one at a lower interest rate.

Related: What Is A Good Credit Score?

While a good—or even an excellent—credit score improves your chances of getting a home loan, it’s still possible to qualify for a mortgage with a bad credit score. Here are a few tips to help you qualify if your credit isn’t the best:

1. Increase your down payment. The more cash you have on hand, the less impactful your credit score is to lenders.
2. Lower your debt-to-income (DTI) ratio. Your DTI is how much debt you have relative to your income. If you have a high DTI, it means you’ll struggle more to pay your mortgage in case of an emergency. The lower your DTI, the fewer problems you’ll have making payments on time regardless of circ*mstances.
3. Change your expectations. A bad credit score could mean you don’t get to borrow as much as you’d like. This means you might have to adjust your expectations and settle for buying a home that costs a little less in order to qualify for the loan.
4. Look at alternative lenders. The Big Six banks might be your go-to when you first think about getting a mortgage, but traditional lenders typically have high qualification criteria. You could look to alternative lenders, such as your local credit union, mortgage companies or loan companies, or a private lender for a solution.
5. Consider a co-signer.If you’re unable to qualify for a mortgage on your own, adding a co-signer can help as he or she essentially vouches for your ability to pay the mortgage. Being a co-signer is a big responsibility, especially if the primary borrower runs into problems with their mortgage payments, so be sure you understand the full terms and conditions before taking this step.
6. Add a guarantor.Similar to adding a co-signer, a guarantor vouches for your ability to pay the mortgage, but does not take on the same level of responsibility.

Related: How To Get A Mortgage With Bad Credit In Canada

Your credit score is one part of getting a mortgage, but it’s not the only part. Your lender considers many facets of your finances, including:

• Income. How much you earn is a major factor. Lenders want to make sure you can afford to make payments on time every month.
• Job history. A stable job shows lenders you can reliably pay your home loan. Those who have job-hopped, have had a break in work or self-employed individuals might have a harder time getting a mortgage compared to those who have worked for the same employer for a few years.
• Down payment. The higher your down payment, the smaller your home loan will be. This means you’re less risky to lenders.
• Debt-to-Income (DTI) ratio. A lower DTI indicates to lenders that you shouldn’t have any problems making payments on your home loan.
• Cost of home. The higher the home price, the harder it can be to secure the full loan amount you want with a bad credit score.
• Derogatory marks on your credit. Derogatory marks on your credit can result from delinquency, defaults and bankruptcies. The more you have, the harder your chances of securing a mortgage can be.

Related: 10 Tips To Get Approved For A Mortgage

You could try getting a home loan with a bad score now, but you risk not qualifying for a mortgage or paying more to get the home of your dreams. You could wait a few months and improve your score instead. Here’s how:

1. Pay off outstanding debt. If you have old debt that’s hanging around on your credit report, or even high credit card balances, take some time to pay it down. Doing so lowers your credit utilization and also shows a positive on-time payment history to lenders.
2. Keep balances low. When you use credit cards, pay them off in full at the end of the pay period. You avoid paying interest and it shows lenders you have the cash on hand to pay for what you borrow.
3. Limit new credit. It’s a good idea to limit new lines of credit or loans you borrow when you plan to buy a home. Opening new accounts could lower your credit score initially and even lower your age of credit. So, if opening a new credit card is something you need to do, you should do so either after you secure your mortgage or months before getting one.

Where To Check Your Score

You can check your credit score with one of the two credit bureaus in Canada: Equifax or TransUnion. You can request a credit report once a year for free. Your bank may also provide a free credit score.

Disputing Errors on Your Credit Report

You can reach out to either credit bureau to dispute an error on your credit report, but you’ll need to have proof that the information on file is incorrect or doesn’t belong to you. The credit bureau will provide details about what specific information you need to provide. Keep in mind that only inaccurate information can be removed from your credit report; negative information that is accurate cannot be removed.

In addition to determining which mortgage program you’re eligible for, lenders use credit scores to assess a borrower’s risk of default. Higher scores suggest a smaller risk of missed payments and foreclosure so it’s easier to qualify for a lower interest rate.

Homebuyers with good or excellent credit scores—from 670 to 850+—typically have the best mortgage rates.