Find out the information on what credit score is needed for a mortgage in Canada.
Get to know the credit score needed for a mortgage in Canada by reading the information below.
As you all know, your credit score plays a significant part in getting a mortgage. The lower your credit score, the lower your chances of getting declined. There are of course companies who are willing to give considerations, but they will usually offer.
Credit Score for Mortgage in Canada
Typically, 680 is the needed credit score for a mortgage in Canada. People who have a 680 and above credit score get better terms and higher interest rates. Individuals who are below 600 are known to be risky, which is why most lending companies will offer higher interest rates.
Checking Your Credit
Lenders will usually check your credit score by asking for a report from two different agencies in Canada, which are the Trans Union and Equifax. They will typically look at how stable your borrowing history is and how you pay your debts. People with high scores are also being checked because the company needs to make sure about the history of repayment.
Explanation of credit score ranges in Canada
Knowing the explanation of credit score ranges in Canada is essential for you to understand them fully well.
Getting your loan or credit card approved will depend highly on your credit score. Not everyone is familiar with the ranges of credit score in Canada, which is why familiarizing yourself with them is important. Below are the credit score ranges that you need to know.
Poor
Poor credit score ranges from 300 to 559. According to a study, almost 4% of the population in Canada has this score. This can cause difficulties when applying for loans and credit cards.
Good
Good credit score ranges from 660 to 724. 15% of the population has this score. This credit score can help you to obtain a loan or a credit card but with added requirements.
Excellent
An excellent score ranges from 750 and above. 57% of the population has this score. They can quickly obtain every loan or credit card that they need without providing requirements.
How are credit scores calculated in Canada?
In Canada, credit scores are calculated to show your creditworthiness which is useful for the lending institutions to identify the level of risk involved in lending you loans such as mortgage or home loans. The credit score ranges from 300 to 850. Higher the score, better are chances of you repaying your loans and hence, lower the risk for the lenders.
The credit score is determined by giving your payment history the 35 % weight. Followed by, the amount you already owe as 30%. The weight of 15% is given to the length of your credit history. The new credit applications that you have made and the type of credit that you have used in the past account for 10 % each.
Mortgage options Canada based on credit score
The credit score is a measure of your creditworthiness. The credit score of the FICO credit scoring model can range from 300 to 850. The credit score of 850 is the highest and 300 is the lowest that you can get. Higher credit score shows high credit creditworthiness and lower credit score show low creditworthiness.
If you have a high credit score such as over 700, you will get your loan request approved unless there is a major issue with the credit payments or credit related information in your reports for the last 12 months. With a high credit score, you will get better interest rates and easy to manage terms and conditions.