It’s fairly common knowledge that your credit score is an important part of your mortgage application. Higher scores not only get you lower mortgage interest rates, they also improve your chance of being approved at all. Before you go mortgage shopping, be sure you know exactly what a credit score is and how applying for a mortgage affects it.
Your credit score is a number between 300 and 900 that shows lenders how creditworthy you are. It’s determined using 5 major factors, listed in order of importance:
· Your payment history
· How much credit you’re using
· How long you’ve had your accounts
· How many different types of accounts you have
· How many creditors pulled your credit
900 is a perfect score, and 300 is the lowest, but it’s hard to get to either end. The average Canadian credit score is around 650, but it varies from province to province. Getting your score above 760 would give you access to the best rates – there’s basically no difference between a score of 760 and 900 except bragging rights.
No – checking your own score doesn’t affect your credit. It’s only when a lender pulls your credit for the purpose of giving you a loan or credit card that your score decreases.
Because every lender has to check your credit individually, shopping for the best mortgage rates by yourself will mean your credit is pulled multiple times. This can actually hurt your score!
If you go to a mortgage broker instead, they’ll pull your credit once and present it to multiple lenders. If you’re wondering why you can’t do that yourself, it’s because mortgage brokers are specially licensed by the provincial government to deal with lenders on your behalf.
Your mortgage broker won’t pull your credit until you’re ready to submit either, so don’t worry about having your credit pulled too early and having it drop before you buy.