After one too many times bumping into your landlord while exiting the shower; being woken up by your upstairs neighbour’s 3:00 am showers; or wondering how you ended up with a roommate far too prone to sharing your information, you’ve decided to take the plunge: Purchasing your own place.
Though Dr. Google warned you only had a week to live, you’ve still decided to trust Big Tech. You’ve asked: What is a good credit score to buy a house? And you’re shocked to learn about something called a credit score. Never explained to you before, it really affects what size mortgage a lender will finance!
At first confusing, once explained it becomes unsettling. Now the bank is telling you that those few late payments, your expensive car payment and your spending habits affect you getting a mortgage. This is sobering. Why? Because your credit card statement has always said you had excellent credit and they kept offering you higher lines of credit – why would they say that?
In Canada, credit scores range from 300 to 900 with the Canadian average credit score being 650. Canada’s two national credit bureaus, Equifax and Transunion, explain that a credit score above 650 likely qualifies you for a standard loan, while a score under 650 makes it more difficult to purchase your dream home and a rating under 550 makes it very challenging.
Let’s simplify credit score ranges:
- Poor - 500 and under: Most lenders are reluctant to approve such customers
- Average – 650: Not perfect but not terrible either; loans will be available but not at the best interest rates
- Good 660 to very good 759: Viewed as low-risk, borrowers are offered better interest rates
- Excellent 760 to perfection 900: Considered excellent, these customers are offered the best loan terms and interest rates
Decreasing debt, paying your credit card balance in full and living within your means: small but beneficial changes you can make. They will increase your credit rating within Canada and help provide you with the credit score that is needed to buy the home you’ve always wanted. It’s never too early to consult your trusted local realtor or mortgage broker to ensure you’re making the best decisions for your credit rating.