Your Credit History and Your Mortgage: What Lenders Look At

When you apply for a mortgage, the lender wants to know how you've handled borrowed money so far. Your credit report is where they look. It helps to know what's in it before someone else reads it.

What a credit report shows

Canada's credit bureaus collect information from the companies you deal with. A report typically lists your credit cards, loans and lines of credit, when each was opened, its limit and balance, and whether payments arrived on time. It also records inquiries from lenders when you've applied for credit, accounts sent to collections, and events such as a bankruptcy or consumer proposal.

From this, the bureaus calculate a credit score. Lenders use it, but they read the report behind it as well, alongside your income, your down payment and the property itself. The score is part of the picture, not the whole of it.

The habits that shape it

• Paying on time, every time, including small bills. Payment history carries a lot of weight.
• Keeping balances well below your limits rather than running cards close to the top.
• Keeping older accounts in good standing. A long, steady record helps.
• Applying for new credit only when you need it, since a cluster of applications in a short time can count against you.
• Dealing with overdue accounts rather than letting them sit.

Check your own report

You're entitled to ask each bureau for a copy of your report, and checking your own file doesn't affect your score. Mistakes happen: an account that isn't yours, a debt shown as unpaid after you settled it, an old address tied to someone with a similar name. Each bureau has a process for disputing errors, and it can take time, so looking early is useful.

Why new borrowing matters around an application

A lender assesses you as you are on the day you apply, and many check again before the mortgage is advanced. Financing a vehicle, opening a store card for furniture or co-signing for a relative in between changes your debts and adds inquiries to your file. It doesn't always cause a problem, but it can, which is why it helps to ask before taking on anything new between application and closing.

A thin or bruised history

Some people have very little credit history because they're new to Canada, young, or have always paid cash. Others have a rough patch behind them. Neither ends the conversation. Lenders differ in what they'll consider, history can be built or rebuilt with time and steady habits, and other strengths in an application count too. The options may be different, and we can explain what they are and what they cost.

If you're unsure how your credit history would look to a lender, we're happy to talk it through with you, with no judgment and no obligation.