{"id":16297,"date":"2019-03-12T09:48:53","date_gmt":"2019-03-12T13:48:53","guid":{"rendered":"https:\/\/www.zoocasa.com\/blog\/?p=16297"},"modified":"2023-05-19T10:21:18","modified_gmt":"2023-05-19T14:21:18","slug":"how-does-my-credit-score-affect-my-mortgage-interest-rates","status":"publish","type":"post","link":"https:\/\/www.zoocasa.com\/blog\/how-does-my-credit-score-affect-my-mortgage-interest-rates\/","title":{"rendered":"How Does My Credit Score Affect My Mortgage Interest Rates?"},"content":{"rendered":"\n

To qualify for the best\u00a0mortgage<\/a> rates, you\u2019ll need a high credit score. When you apply for a mortgage, lenders use your\u00a0credit score<\/a> as a significant factor in determining the rate you receive.<\/p>\n\n\n\n

Before you start house\u00a0hunting, be sure to check your credit report<\/a> and tackle credit issues early to\u00a0improve your score. Doing so could save you thousands and\u00a0help you qualify for the best rates.\u00a0<\/p>\n\n\n\n

Enjoying our content? Subscribe to our free\u00a0<\/em><\/strong>weekly newsletter<\/em><\/strong><\/a>\u00a0to get Canadian real estate market insights, news, and reports straight to your inbox.<\/em><\/strong><\/p>\n\n\n\n

Why does your credit score matter to lenders when shopping for a mortgage?<\/h2>\n\n\n\n

Your credit score lets a lender know what kind of risk you\u2019ll be and ultimately determines if they should lend you money or not. A lender looks at both your credit score and your credit report to determine your creditworthiness.<\/p>\n\n\n\n

The better your financial profile is, the lower the interest rate you will be offered! Even a small interest rate difference could mean tens of thousands of dollars saved over the lifetime of a mortgage or loan. <\/p>\n\n\n\n

Think of it this way. You know that friend you have that always asks for money but never pays you back? Would you want to lend them money again? Probably not. To you, they haven\u2019t demonstrated they\u2019re responsible with money. So it\u2019s less likely you\u2019ll loan that friend money ever again unless maybe you charged interest! Lenders, of course, work the same way.<\/p>\n\n\n\n

A poor credit score shows lenders that you might not be able to pay them back, or you might be late paying them back. This makes it less likely to get approved for a mortgage and if you do, it might be stuck with a high interest rate. <\/p>\n\n\n\n

On the other hand, a high credit score shows lenders you are responsible with your money and have a proven track record of making payments on time<\/a>. This translates into lenders being more willing to approve you for a mortgage at more favourable rates.<\/p>\n\n\n\n

What should your credit score look like to receive the best mortgage rates?<\/h2>\n\n\n\n

In Canada, credit scores typically range from 300 to 900 and are determined by two major credit bureaus: Equifax and Transition. Borrowell works with Equifax to provide you with your Equifax Risk Score (ERS 2.0) \u2013 a popular and legitimate score used by many banks and lenders. <\/p>\n\n\n\n

When mortgage shopping, the higher your score, the better.<\/p>\n\n\n\n

High scores (700 points or more) generally indicate you\u2019re less likely to default on your loan or mortgage payments. On the other hand, low scores indicate you have a history of missed payments, late payments or you\u2019ve defaulted on a loan.<\/p>\n\n\n\n

Below is a breakdown of credit score ranges and what each range means when qualifying for a mortgage. <\/h3>\n\n\n\n

741 or more:<\/strong> You have an excellent credit score! You can consider yourself a credit rockstar. This is where the best mortgage rates live.<\/p>\n\n\n\n

713 to 740:<\/strong> You have a good credit score. You should expect to receive very good interest rate offerings and a variety of credit products.<\/p>\n\n\n\n

660 to 712:<\/strong> This is considered fair or average to lenders. But once you get to 660, you\u2019re entering into average credit score territory.<\/p>\n\n\n\n

575 to 659:<\/strong> This is a below average credit score. If you\u2019re below 640, you may have trouble getting a conventional mortgage from a bank or online lender. Consider working on improving your credit score with the tips below.<\/p>\n\n\n\n

300 to 574:<\/strong> Your credit score is poor and needs improvement. You\u2019re considered to be a high-risk borrower and if you\u2019re approved, you could end up paying a lot in interest. Keep reading for some improvement suggestions below!\u00a0<\/p>\n\n\n\n

For every 20-point increase your score drops, you\u2019re likely to see small changes in the interest rate you\u2019re offered. Lenders adjust the rate they offer each time your credit score moves up or down by 20 points.\u00a0<\/p>\n\n\n\n

How to improve your credit score while on the house hunt <\/h2>\n\n\n\n

If your credit score could use a little TLC, there are steps you can take to improve it. <\/p>\n\n\n\n