How to Improve Your Credit Scores to Help You Buy a Home

To improve your credit score before buying a home in Canada, focus on paying bills on time, reducing outstanding debt and checking your credit reports for errors.

These steps can strengthen your mortgage application and may help you qualify for more competitive interest rates.

Start several months before you plan to buy, as improvements can take time to appear on your credit report.

KOHO Credit Builder

KOHO Credit Builder helps Canadians establish or improve their credit history through consistent monthly payments, without relying on a traditional credit card.

With KOHO Credit Builder, you can:

• See an average credit score increase of 74 points*

• Get approved without a hard credit check or minimum deposit

• Pay no interest on the line of credit

• Track your credit score and credit report directly in the KOHO app

• Build credit history through monthly payments reported to the credit bureaus

1. Check Your Credit Reports Before Applying for a Mortgage

Start by requesting your credit reports from Equifax and TransUnion.

Review both reports for:

• Accounts you don't recognize

• Incorrect late payments

• Outdated personal information

• Duplicate debts

• Accounts incorrectly showing an outstanding balance

If you find a mistake, submit a dispute to the credit bureau and contact the lender reporting the information.

Correcting an error could improve your credit profile without requiring you to take on additional debt.

You can check your own credit reports for free without affecting your credit score.

2. Pay Every Bill on Time

Payment history is one of the most important factors affecting your credit score.

Set up automatic payments or calendar reminders for your credit cards, loans and other accounts.

If you can't pay your full credit card balance, make at least the minimum payment by the due date.

Paying only the minimum can result in interest charges, but it helps you avoid a missed payment.

3. Reduce Your Credit Card Balances

Your credit utilization ratio measures how much of your available revolving credit you're using.

Aim to keep your balances below 30% of your total credit limit.

For example, if you have a credit card with a $5,000 limit, try to keep your reported balance below $1,500.

Paying down balances can improve your utilization ratio once the updated amounts are reported to the credit bureaus.

You don't need to carry a balance or pay interest to build credit.

4. Avoid Applying for Unnecessary Credit

Applying for several credit cards or loans shortly before buying a home can work against you.

New applications may trigger hard credit inquiries, while additional borrowing can increase your monthly debt obligations.

If you're planning to apply for a mortgage soon, avoid taking out a new car loan or financing an expensive purchase unless necessary.

When comparing mortgage offers, try to complete your applications within a two week period so the credit bureaus can generally treat those mortgage inquiries as a single inquiry for scoring purposes.

5. Keep Older Credit Accounts Open

The length of your credit history contributes to your credit score.

Closing an older credit card can shorten your active credit history and reduce your total available credit, potentially increasing your utilization ratio.

Consider keeping an older account open if it has no annual fee and you can manage it responsibly.

You don't need to keep an expensive or unsuitable account solely for your credit score.

6. Pay Down Existing Debt

Reducing debt can strengthen your mortgage application in two ways.

First, lower credit card balances may improve your credit score.

Second, reducing monthly loan payments can improve your debt-to-income ratios, which lenders use to assess mortgage affordability.

For example, paying off a car loan could free up monthly income that would otherwise count toward your existing debt obligations.

Prioritize debt repayment without using money you've set aside for your required down payment, closing costs or emergency savings.

7. Build Credit if You Have a Limited History

If you're new to Canada or have never used credit, you may need to establish a payment history before applying for a mortgage.

A secured credit card or credit-building product can help when the provider reports your payments to a credit bureau.

Use the account for manageable expenses and pay it on time.

You don't need several new credit products. One account managed responsibly over time can be a useful starting point.

How Long Does It Take to Improve Your Credit Score Before Buying a House?

It depends on what's affecting your score.

If high credit card utilization is the main issue, you may see improvement after paying down your balances and waiting for the updated information to be reported.

If your report contains missed payments or collections, rebuilding your credit can take considerably longer.

There is no guaranteed timeline or number of points you can expect to gain.

Starting six to twelve months before applying for a mortgage gives you time to review your reports, reduce debt and establish consistent payment habits.

What Credit Score Should You Aim for When Buying a Home?

Many traditional mortgage lenders prefer a credit score of 680 or higher, although their requirements vary.

Some insured mortgage programs have a minimum credit score requirement of 600 for at least one borrower or guarantor.

A score below 680 doesn't automatically disqualify you, and reaching 680 doesn't guarantee approval.

Mortgage lenders also consider your income, employment, down payment and existing debt.

They may use different credit scoring models from the ones available through consumer credit monitoring services.

When Should You Apply for Mortgage Pre-Approval?

Consider mortgage pre-approval once you've reviewed your credit reports, addressed any significant issues and established a realistic homebuying budget.

A lender or mortgage broker can assess your financial situation and identify anything that might prevent approval.

Pre-approval can help you understand your potential borrowing limit, but it isn't a guarantee of final mortgage approval.

*Based on users with a starting score of 450 or under and who used all of our credit building tools (i.e. Credit Building, Secured Credit Building) for 12+ months with on time payments. Credit building tools we offer are not a credit repair tool and does not guarantee an improvement in credit score. Credit scores are based on complex models involving a variety of factors. Consistent on-time payments help improve scores and missed or late payments may cause credit scores to decrease. Outcomes may vary among users.