How Mortgage Brokers Look at Your Credit Score
When you begin the journey of buying a home, especially if it's your first time, one of the most important (and often misunderstood) factors is your credit score.
It’s more than just a number—it’s a financial snapshot of your reliability in the eyes of lenders.
If you're working with a mortgage broker, understanding how they interpret your credit score can help you prepare, position yourself better, and ultimately improve your chances of being approved for a mortgage.
What Is a Credit Score?
Your credit score is a three-digit number ranging roughly from 300 to 900 in Canada. The higher your score, the more favorably you’ll be viewed by lenders. In general:
Excellent: 760–900
Good: 725–759
Fair: 660–724
Below Average: 560–659
Poor: Below 560
Mortgage brokers often start with this number when evaluating your file because it helps determine which lenders they can approach.
A score above 680 opens the door to most A lenders (banks and credit unions), while anything below that might push the deal toward B lenders or private lenders, who charge higher interest rates and typically require larger down payments.
How Is a Credit Score Calculated?
Credit scores are calculated by two main agencies in Canada: Equifax and TransUnion. Though each may show slightly different scores, both use similar criteria to evaluate creditworthiness. The calculation is based on:
Payment History (35%) – Have you made your payments on time? Late or missed payments are a major red flag.
Credit Utilization (30%) – How much of your available credit are you using? Keeping balances under 30% of your limits is ideal.
Credit History Length (15%) – How long have your accounts been open? Longer histories show stability.
New Credit Inquiries (10%) – Multiple hard inquiries in a short time can be viewed negatively.
Credit Mix (10%) – A healthy mix of installment loans (like car loans) and revolving credit (like credit cards) shows responsible usage.
Mortgage brokers often pull a full credit report to examine not just the score, but also the reasons behind it. A lower score due to a one-time event like maternity leave or temporary job loss might be treated differently than one due to chronic late payments or defaulted accounts.
Why Mortgage Brokers Care About Your Credit Score
Mortgage brokers act as intermediaries between you and potential lenders. Their job is to match your financial situation with a lender who is willing to approve you for a mortgage. Since lenders are assessing the risk of lending to you, brokers must paint the best (yet truthful) picture of your financial behavior—and your credit score is central to that.
Here’s how a credit score affects the mortgage process:
1. Lender Type Selection
A high score (usually 680+) allows the broker to go straight to A lenders—major banks like TD, RBC, or Scotiabank. These institutions offer:
Lower interest rates
Standard mortgage products
Easier CMHC insurance approval
A lower score pushes brokers toward alternative or B lenders like Home Trust or Equitable Bank. These lenders specialize in serving clients who may not meet traditional guidelines but still show overall financial responsibility. However, you’ll typically need:
A larger down payment (often 20%)
To pay higher interest rates
To show a strong income and explanation for the low score
Below 600, many mortgage brokers will look at private lenders as a last resort. These loans are often short-term, interest-only, and meant to give you time to rebuild credit before refinancing with a better lender.
2. Interest Rate Determination
The better your score, the lower the risk to lenders—and therefore, the better your rate. A difference of just 40–60 points can shift your mortgage rate from 5.29% to 6.79% or higher, depending on the lender. This difference translates to thousands of dollars over the course of your mortgage.
3. Down Payment Requirements
CMHC (Canada Mortgage and Housing Corporation) and other insurers back mortgages with down payments as low as 5%, but they are cautious about low credit scores. If your score is below 600, CMHC will likely decline to insure your mortgage—forcing you into the 20% down payment range with a B lender or private lender.
4. Explanation Matters
Many people believe that a credit score is a black-and-white pass/fail number. Mortgage brokers know better. They’ll often review the full credit report to understand:
Were there missed payments due to life events like illness, job loss, or maternity leave?
Was it an old account that you forgot about?
Is the score rising steadily over the past few months?
If the story behind your credit issues is reasonable and you’ve demonstrated recovery (such as no new missed payments in the last 6–12 months), brokers may still be able to work with flexible lenders.
What Mortgage Brokers Look for Beyond the Score
While your credit score is important, brokers look at your whole financial profile. These include:
Gross Debt Service Ratio (GDS): Your monthly housing costs divided by income. Should be under 39% for A lenders.
Total Debt Service Ratio (TDS): Your total monthly debts (including car loans, credit cards, etc.) divided by income. Target is under 44%.
Income Stability: Long-term, consistent income is highly favorable.
Down Payment Source: Is it from savings, a gift, or borrowed? Lenders prefer savings or a gift letter from a family member.
If you have a low credit score but strong income, low debt, and a stable job, many brokers can still get you approved through a non-traditional lender, especially if you’ve shown recent improvement in your credit behavior.
Tips If You Have a Low Credit Score
If you’re working with a broker and worried about your credit score, here are a few proactive steps you can take:
Get a copy of your credit report from Equifax or TransUnion to spot errors or surprises.
Pay all bills on time, even if it’s just the minimum.
Keep credit balances under 30% of the available limit.
Don’t apply for new credit while mortgage shopping—hard inquiries can lower your score.
Talk to a broker early—they can often suggest credit repair steps that will help you qualify in the near future.
Final Thoughts
Mortgage brokers don’t just plug your credit score into a calculator—they evaluate the full story. A score is a key piece of the puzzle, but not the only one. If your credit score is below ideal, brokers can still help you explore alternative lending solutions, suggest strategies for improvement, and map out a timeline for homeownership that fits your situation.
In short: your credit score is important, but it’s not everything. A mortgage broker’s insight and network of lenders can make the difference between a declined application and an approved mortgage—even if your score isn’t perfect.
