What is credit history, and how does it affect getting a mortgage?
Credit history is one of the most critical factors in the mortgage process in Calgary and across Canada. It serves as a financial health card that allows lenders to assess your chances of repaying borrowed funds on time. In the Canadian mortgage system, your credit score not only determines whether you will be approved for a mortgage at all, but also directly affects the interest rate you will be offered, which can mean tens of thousands of dollars over the life of your mortgage.
What is a credit history?
A credit score is a three-digit number ranging from 300 to 900 in Canada that represents your creditworthiness at a given point in time. This number also serves as an indicator of your financial past and how consistently you pay your bills and debts.
A credit report, on the other hand, is a detailed summary of your credit history, employment history, and personal financial information in a file. This document contains information about all of your credit accounts, loans, credit cards, payment history, and any negative entries, such as missed payments or bankruptcy.
Factors that affect your credit score
Your credit score is calculated based on several key factors, each of which has a different impact on your overall score:
Payment history (35%) is the most important factor. Paying your bills on time shows lenders that you are a reliable borrower. Even one missed payment can negatively impact your score.
Credit utilization (30%) refers to the percentage of your total available credit that you are using. Ideally, you should keep this figure below 30% of your credit limit.
Length of credit history (15%) shows how long your credit accounts have been active. A longer credit history usually contributes to a higher rating.
New credit (10%) takes into account the number of recently opened accounts. Opening many new accounts in a short period of time can lower your score.
Credit mix (10%) looks at the variety of credit types you have, such as credit cards, car loans, and mortgages.
Credit score requirements for mortgages in Calgary
Minimum requirements for different types of mortgages
In Calgary, as in the rest of Canada, minimum credit score requirements vary depending on the type of mortgage and the lender.
For conventional mortgages (where you put down 20% or more as a down payment), most mortgage lenders look for a minimum credit score of 680. However, some lenders may have different credit score requirements.
For high-ratio insured mortgages (less than 20% down payment), you need a minimum credit score of at least 600 to qualify for an insured mortgage, according to CMHC insurance rules. The mortgage must be insured if the down payment is less than 20% of the purchase price of the home.
Credit score levels and what they mean
Excellent rating (760-900) gets you the best rates. According to Calgary Homes, for a typical single-family home in Calgary valued at $747,500 with a 20% down payment, an excellent rating could secure a rate of around 4.79%, which translates to a monthly payment of approximately $3,185.
A good credit score (680-749) still secures competitive rates. Under the same conditions, a good credit score could mean a rate of around 5.14% and a monthly payment of $3,310.
Satisfactory credit score (600-679) results in higher rates. At a rate of around 5.99%, the monthly payment can be as high as $3,765.
This difference may seem insignificant on a monthly basis, but over the course of a 25-year mortgage, the difference between an excellent and satisfactory credit rating can amount to tens of thousands of dollars in total interest.
Alternatives for low credit scores
B-lenders and alternative lenders
Alternative mortgage lenders, such as B-lenders, may have a minimum credit score of just 500 for uninsured mortgages. B-lenders include credit unions, monoline lenders, and trust companies.
Private mortgage lenders fill a unique niche by serving as a short-term solution for borrowers who cannot obtain financing through traditional means. While private lenders and their bad credit mortgages often do not have minimum credit score requirements, they charge high interest rates and fees.
Consequences of using alternative lenders
It is important to understand that while alternative options exist, they typically come with higher interest rates and additional costs. Borrowers with low credit scores should strive to qualify for a mortgage with a B-lender or bank over time.
Two major credit bureaus in Canada
Equifax Canada and TransUnion Canada
There are two major credit reporting agencies in Canada: Equifax Canada and TransUnion Canada. Both agencies collect information from various credit providers and other third parties to create credit reports.
Differences between agencies
Different algorithms are one of the main reasons for differences in ratings. TransUnion and Equifax calculate your credit score using different methods:
- Equifax looks at 81 months of credit history using the FICO model
- TransUnion looks at 84 months using the VantageScore model
These different models weigh factors such as payment history and credit utilization differently.
Different update schedules can also cause variations in scores. Equifax updates at least monthly, while TransUnion updates monthly or every 45 days at most.
They do not share information with each other. Not all lenders report to both agencies, which means that one agency may have information that the other does not.
How to check your credit score
Free options
To find out your credit score, contact the two Canadian credit reporting agencies: Equifax Canada at www.equifax.ca and TransUnion Canada at www.transunion.ca.
myEquifax Canada offers instant online access to your credit report. TransUnion is available online, by phone, by mail, or in person.
Credit Karma provides free weekly updates from TransUnion. There are also other free services, such as Borrowell, that provide regular credit score updates without affecting your score.
Paid services
For a fee, these agencies will provide you with an online copy of your credit score, as well as a detailed credit report — a detailed summary of your credit history, employment history, and personal financial information in a file. You can also get a free copy of your credit report by mail.
How to improve your credit score
Key strategies for improvement
Always pay your bills in full and on time. If you cannot pay the full amount, try to pay at least the minimum required amount shown on your monthly statement.
Pay off your debts as quickly as possible. This includes loans, credit cards, lines of credit, etc.
Never exceed the limit on your credit cards and try to keep your balance well below the limits. Ideally, keep your credit card usage below 30% of the total amount.
Reduce the number of credit applications. Avoid applying for too many new credit accounts at once.
Additional tips for improvement
Never exceed 50% of your credit card balance. Sometimes it is difficult to keep your credit card balance below 30% of the total amount. To maintain a good credit rating, never exceed 50% of your credit card balance limit.
Don't close old accounts. The length of your credit history is an important factor in your credit score.
Demonstrate your financial stability by showing a stable home address, stable employment, and regular monthly income.
Paying off overdue bills
Pay all overdue bills (collection). Paying off each credit card and all your overdue bills will improve your score. Keeping unpaid debts is the biggest factor that weakens your credit score.
It is recommended that you set up a payment plan for each overdue bill. Once you are debt-free, this will increase your monthly income as you will no longer have to pay interest.
Correcting errors on your credit report
The dispute process
If you find any errors on your report, report them immediately to the credit reporting agency and the organization responsible for the inaccuracy. You have the right to dispute any information on your credit report that you believe is incorrect.
Steps to correct errors:
- Support your case - gather receipts, statements, and other documents related to your credit accounts
- Contact the credit reporting agencies - use their forms to correct errors and update information for both Equifax Canada and TransUnion Canada
- Contact the creditor - you can speed up the process by contacting the creditor directly about the error
- Escalate your case - if you are not satisfied with the results of the investigation, ask to speak to someone at a higher level
- Add a consumer statement - if you are still not satisfied, ask the credit reporting agencies to add a consumer statement
Review Timelines
TransUnion completes its investigation of dispute requests within 30 days of the dispute being filed. For assistance in filing a dispute, you can contact TransUnion at 1-800-663-9980.
Before credit reporting agencies make changes to your credit report, they must verify your claim with the creditor who reported the information. If the creditor agrees that your credit report is inaccurate, the credit reporting agencies will update your credit report.
Debt ratios and credit scores in the mortgage process
Debt service ratios
Your credit score not only affects your mortgage rate, but also plays a role in determining how much debt you can take on when applying for a mortgage.
Gross debt service ratio (GDSR) is the percentage of your gross income spent on housing expenses, including mortgage payments, property taxes, heating, and 50% of condominium fees (if applicable).
Total debt service ratio (TDSR) is the percentage of your gross income spent on all debt obligations, including housing expenses, credit card payments, car loans, and other debts.
Current CMHC guidelines
As of 2025, CMHC allows the following maximum debt ratios for insured mortgages:
- GDSR: 39%
- TDSR: 44%
These restrictions apply regardless of your credit score, following a policy change in July 2021. Previously, borrowers with credit scores below 680 faced stricter limits (35% GDSR and 42% TDSR).
Practical tips for potential homebuyers in Calgary
Timeframe for improving your credit
If you follow expert advice on improving your credit, it will take several months to see the first results. After one year, you will see a real improvement in your score.
Quick 100-point improvement
To quickly improve your credit score by 100 points:
- Consolidate your credit cards
- Set up automatic monthly payments for your bills
- Increase your credit limit
- Maintain a credit history so your banking history is easily accessible
- Check your credit report regularly for errors
- Enroll in a credit improvement program
Minimum credit score for buying a home
If you are considering buying your first home in Calgary or Canada, the minimum credit scores for getting a good interest rate are typically at least 680.
Consult with professionals
Meridian Credit Union emphasizes the importance of working with qualified mortgage professionals who can evaluate all aspects of your financial profile. In some cases, your mortgage specialist will consider ratios up to industry standard maximums of 39% GDS and 44% TDS.
Conclusions and recommendations
Understanding your credit history and its impact on obtaining a mortgage in Calgary is critical for anyone considering purchasing a home. A credit score of 680 or higher is required to qualify for the best mortgage rates in Canada in 2025. Some mortgage providers allow you to qualify with credit scores between 600 and 680, but these providers may charge higher interest rates.
Preparing to apply for a mortgage should start well before you begin looking for a home. Regularly checking your credit score, correcting any errors on your credit report, and taking steps to improve your score can save you thousands of dollars over the life of your mortgage.
Remember that while credit score is a critical factor, it is not the only one. Lenders also consider your income, job stability, down payment size, and overall financial situation when making a mortgage decision. By working with experienced mortgage professionals in Calgary and understanding all aspects of the mortgage approval process, you can greatly improve your chances of getting the best possible mortgage rate for your situation.