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(May 28, 2024)

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If you are new to Canada and qualifying for a mortgage, there is one major qualification criterion that works heavily in your favor. Upon your entry into Canada, the mortgage qualification rules essentially give you the benefit of the doubt when it comes to your credit history. Although you may have been a regular user of credit in your mother country, Canadian mortgage lenders will only require a short 2-year Canadian credit history. Unless you have originated from the US, where the ability to acquire a US credit report is convenient and/or accessible, most Canadian Banks will thereby request one. Otherwise, for most other applicants who originate from other countries, Canadian banks will essentially project your creditworthiness based simply on your newly established 2-year tenure in Canada. Take advantage of this; it’s a once-in-a-lifetime opportunity! Going forward, your credit activities are reported and logged within Canada’s leading credit bureaus, Equifax and TransUnion. The tabulation of your credit score is dynamic as the bureaus receive monthly reports from all your creditors. Depending on the reporting, your score adjusts accordingly. Credit bureaus generate scores that are unique to their own credit rating models and are therefore not identical to other competing credit bureaus. In Canada, the most common credit reporting bureaus are Equifax and TransUnion. For example, a score of 800 with Equifax will not translate to the precise metric with TransUnion. In addition to varying credit rating models, the bureaus may also contain different information (not all creditors report to both credit bureaus; hence, your score is tabulated accordingly). Canadian mortgage brokers mostly use Equifax as the default bureau when submitting applications to lenders. However, lenders may additionally pull from TransUnion once the application reaches their adjudication portal. A minimal credit score for mortgage qualification is 600-620. Once you reach scores over 700, you essentially reach top-tier brackets with Canadian banks (best rates and maximum exposure to qualification guidelines).

Here are the key rules to follow to ensure you stay on the right path when it comes to establishing and maintaining your Canadian credit score:

Apply for credit immediately upon entry into Canada (or as soon as possible). Without credit, you will not generate a score. The longer you wait, the further along you delay the start of your required 2-year tenure.
Acquire at least 2 forms of credit (i.e., credit card, line of credit, car loan, etc.) and request a credit limit of at least $2,000.
Once you have acquired a credit card, use it! Your credit score will not tabulate simply because you have a credit card; you must engage it with transactions to trigger the creditor to report it to the credit bureaus.
Make your credit payments ON TIME. If you are late with your monthly payment, your creditor will report it to the bureau as such, and your score will decrease.
Avoid running balances on your credit for prolonged periods that are greater than 60% of your approved credit limit. For example, let’s consider a credit card with a $3,000 limit. Naturally, as the card limit implies, you can charge up to $3,000 on the card. But be aware that if you sustain that balance for a prolonged period of time (greater than 2 months), your score will begin to decrease as long as you carry the balance. Many underestimate the impact of this until they qualify for a mortgage and are finally made aware that they have a low score. Many people run all their transactions through their credit cards to collect various forms of affinity points (which is absolutely fine), but be wary of your balance-to-limit ratio (avoid keeping sustained balances on your card that exceed 60%).
Whether you’re a work permit holder, permanent resident, or newly minted Canadian citizen, lenders will generally close the window on any exceptions once you’ve been in Canada for 5 years, at which time you are essentially held to the qualification standard of domestic Canadian citizens. For example, if you have been in Canada for 3 years and are a work permit holder but only have one credit card, lenders would potentially work with you and make an exception. In lieu of not having a second credit facility, they might alternatively ask for a copy of your existing lease and a letter of good standing from your landlord.

So there you have it! With these tips in mind, you’re well on your way to mastering the Canadian mortgage game and building a strong credit history. Welcome to Canada!

Are you new to Canada and have questions about mortgage qualification? Call or text Marko Gelo right now at 604-800-9593, or Click Here to schedule a free, no-obligation phone call with Marko. You can also call Marko on WhatsApp.

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