When you apply for a mortgage, your credit score can affect your mortgage rate. It’s not the only factor lenders use, but it’s one that carries weight. If your goal is to secure the lowest rate possible, this is one of the levers you can pull.
What the credit score means
Your credit score is a number that reflects how reliably you’ve paid debts, how much credit you’re using, how long you’ve held credit, and similar items. Lenders use it because it gives them a quick estimate of how risky it is to lend to you.
How it connects to the mortgage rate
A higher score generally means you pose less risk. That means a lender may offer you a lower mortgage rate. Conversely, a lower score means more risk, which can translate into higher interest rates or fewer good options.
For example, higher credit scores generally qualify for lower rates. Someone with a strong score might secure a rate near the bottom of current offerings, while a lower score could push the rate several points higher. The difference between a good score and a poor one can increase your mortgage cost by up to 3 percentage points.
What else the lender looks at
Even if your credit score is good, your mortgage rate will still depend on things like:
- The size of your down payment
- Your debt-to-income levels and other borrowing commitments
- The type of mortgage, property, amortization you choose
So, while your credit score affects your mortgage rate, it doesn’t act in isolation.
Why this matters
Since mortgages often run for 20-30 years, even a small difference in interest rate can mean tens of thousands more or less in interest paid over time. If you have control over factors that improve your credit score ahead of time, this can improve your borrowing cost.
If your score isn’t where you’d like it
If your credit score is lower than ideal, don’t panic—but recognize you may pay more. You might:
- Be offered a higher rate or face stricter conditions.
- Have fewer lender options.
- Need to bring a larger down payment or partner with someone with stronger credit.
On the flip side: if you have strong credit, you may qualify for a better rate—but that only matters if you compare carefully among lenders, review the full terms, and avoid picking a rate purely because it looks lowest.
In Canada, there are 2 main credit bureaus where you can check your credit score. Each may use slightly different credit scoring models, and not all lenders report to both. It is good practice to keep regular check on your credit to look for incorrect information and if needed, to dispute items on your credit report in a timely manner. These agencies are:
Key take-aways
- Yes: your credit score affects your mortgage rate.
- But: it is one of several important factors. Don’t assume it alone dictates everything.
- If you can, working on your credit score ahead of seeking a mortgage can improve your rate and borrowing options.
- If your score is less-than-strong, be prepared for higher cost and consider ways to strengthen your position before applying.
