Impact of Credit Scores on Mortgage Approvals in Canada

Joel Olson • January 17, 2025

Getting approved for a mortgage can be a big step towards owning a home. But did you know that your credit score plays a huge part in this process? A credit score is like a report card for your financial behaviour, and lenders use it to decide if you’re a good risk. In Canada, this score can affect not just if you get approved but also the kind of interest rates and terms offered to you. 


Understanding Credit Scores and Their Components 


A credit score is a number that shows how reliable someone is with money. In Canada, your credit score can range from 300 to 900, and it's calculated using several factors. Payment history is the most significant part; it tracks whether you pay your bills on time. If you've been late or missed payments, it could lower your score. Another important factor is credit utilization, which looks at how much credit you use compared to how much you have available. If you max out your credit cards, it might hurt your score. The length of your credit history also counts. The longer you've had credit, the better it looks, as it gives more data for lenders to examine. 


Credit scores fall into different ranges that lenders use to decide your creditworthiness. A score between 800 and 900 is excellent and is likely to get you the best financial offers. Scores from 720 to 799 are considered very good, while 650 to 719 falls into the good category. If your score is between 600 and 649, it's fair, but it might result in higher interest rates. A score under 600 is seen as poor, and lenders might view you as a higher risk, making it challenging to get approved for a mortgage. 


Why Credit Scores Matter for Mortgage Approvals 


Credit scores are crucial when you're applying for a mortgage. Lenders look at these scores because they help to assess risk. A higher score usually means you have a strong track record of managing your finances. Lenders feel more confident lending money to those with high scores because they are less likely to default on their loans. On the flip side, a lower score could signal potential issues in paying back borrowed money. 

These scores do not just impact approval. They also influence the terms of your loan, including the interest rate and other conditions. A high credit score can help secure a lower interest rate, which means you'll pay less money over time. It might also allow for better mortgage terms, like a smaller down payment or more flexibility. Conversely, a lower score might mean higher rates and stricter terms, which can make the loan more expensive in the long run. 

By understanding how your credit score affects mortgage approvals, you can be more prepared to work on areas that need improvement, putting you in a stronger position to receive favourable loan terms when you apply. 


Improving Your Credit Score for Better Approval Odds 


Boosting your credit score before applying for a mortgage can greatly enhance your chances of approval. Here are some effective strategies to consider. First, paying bills on time is crucial as payment history makes up a significant portion of your credit score. Setting up automatic payments or reminders can help ensure you never miss a due date. Reducing debt is another vital step. Aim to lower your credit card balances and avoid taking on new debt, which can improve your credit utilization ratio. 


Regularly check your credit report for errors. Mistakes like incorrect account information or outdated balances can negatively impact your score. If you spot any inaccuracies, contact the credit bureau to have them corrected. It’s also wise to limit hard inquiries into your credit report. Each application for new credit can ding your score a bit, so try not to open too many new accounts in a short time. 


When should you start working on your credit? Ideally, potential homebuyers should focus on their credit score at least six months to a year before applying for a mortgage. This timeline allows enough room to make meaningful improvements and see results reflected in your score. Remember, a healthy credit score not only improves approval chances but can also secure better loan terms. 


Exploring Mortgage Options With Challenging Credit 

Having a low credit score doesn’t mean your dream of owning a home is out of reach. There are alternative mortgage options to explore if traditional lenders have turned you down. One option is to work with flexible lenders who focus more on your income and current financial situation rather than solely on your credit score. These lenders may offer alternative loans designed for individuals with less-than-perfect credit. 


Government programs can also be a lifeline. Programs like the Canada Mortgage and Housing Corporation (CMHC) offer mortgage loan insurance which allows you to buy a home with a smaller down payment, making homeownership more accessible. Additionally, some provinces offer support programs specifically for first-time buyers or those with moderate income, which can be helpful when dealing with credit challenges. 


However, it’s essential to weigh the pros and cons before proceeding. While these alternatives can provide a path to homeownership, they often come with higher interest rates or stricter terms. Make sure to research and fully understand the conditions before committing. A mortgage broker can be an invaluable resource for advice tailored to your unique situation, guiding you to the best option available. 



Improving your credit score and exploring all available options are critical steps in the mortgage approval process, especially if you're facing challenges. A good credit score not only boosts your approval chances but also opens the door to better interest rates and terms, saving you money over the life of your loan. By understanding the components of a credit score and taking proactive steps to improve it, you position yourself as a strong candidate for lenders. 


If you're looking for personalized help to navigate bad credit mortgage loans in Canada, the Joel Olson Mortgage Team is here to assist you. With expertise in Canadian mortgage solutions, we're ready to guide you through the process, addressing any challenges along the way. Reach out to us to explore your options and find the best path to securing your dream home, even if other lenders have turned you down!

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Everything You Need to Know About Second Mortgages

By Joel Olson • December 9, 2025
What Is a Second Mortgage, Really? (It’s Not What Most People Think) If you’ve heard the term “second mortgage” and assumed it refers to the next mortgage you take out after your first one ends, you’re not alone. It’s a common misconception—but the reality is a bit different. A second mortgage isn’t about the order of mortgages over time. It’s actually about the number of loans secured against a single property —at the same time. So, What Exactly Is a Second Mortgage? When you first buy a home, your mortgage is registered on the property in first position . This simply means your lender has the primary legal claim to your property if you ever sell it or default. A second mortgage is another loan that’s added on top of your existing mortgage. It’s registered in second position , meaning the lender only gets paid out after the first mortgage is settled. If you sell your home, any proceeds go toward paying off the first mortgage first, then the second one, and any remaining equity is yours. It’s important to note: You still keep your original mortgage and keep making payments on it —the second mortgage is an entirely separate agreement layered on top. Why Would Anyone Take Out a Second Mortgage? There are a few good reasons homeowners choose this route: You want to tap into your home equity without refinancing your existing mortgage. Your current mortgage has great terms (like a low interest rate), and breaking it would trigger hefty penalties. You need access to funds quickly , and a second mortgage is faster and more flexible than refinancing. One common use? Debt consolidation . If you’re juggling high-interest credit card or personal loan debt, a second mortgage can help reduce your overall interest costs and improve monthly cash flow. Is a Second Mortgage Right for You? A second mortgage can be a smart solution in the right situation—but it’s not always the best move. It depends on your current mortgage terms, your equity, and your financial goals. If you’re curious about how a second mortgage could work for your situation—or if you’re considering your options to improve cash flow or access equity—let’s talk. I’d be happy to walk you through it and help you explore the right path forward. Reach out anytime—we’ll figure it out together.
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Don’t Let Collections Derail Your Mortgage Application

By Joel Olson • December 2, 2025
Can You Get a Mortgage If You Have Collections on Your Credit Report? Short answer? Not easily. Long answer? It depends—and it’s more common (and fixable) than you might think. When it comes to applying for a mortgage, your credit report tells lenders a story. Collections—debts that have been passed to a collection agency because they weren’t paid on time—are big red flags in that story. Regardless of how or why they got there, open collections are going to hurt your chances of getting approved. Let’s break this down. What Exactly Is a Collection? A collection appears on your credit report when a bill goes unpaid for long enough that the lender decides to stop chasing you—and hires a collection agency to do it instead. It doesn’t matter whether it was an unpaid phone bill, a forgotten credit card, or a disputed fine: to a lender, it signals risk. And lenders don’t like risk. Why It Matters to Mortgage Lenders? Lenders use your credit report to gauge how trustworthy you are with borrowed money. If they see you haven’t paid a past debt, especially recently, it suggests you might do the same with a new mortgage—and that’s enough to get your application denied. Even small collections can cause problems. A $32 unpaid utility bill might seem insignificant to you, but to a lender, it’s a red flag waving loudly. But What If I Didn’t Know About the Collection? It happens all the time. You move provinces and miss a final utility charge. Your cell provider sends a bill to an old address. Or maybe the collection is showing in error—credit reports aren’t perfect, and mistakes do happen. Regardless of the reason, the responsibility to resolve it still falls on you. Even if it’s an honest oversight or an error, lenders will expect you to clear it up or prove it’s been paid. And What If I Chose Not to Pay It? Some people intentionally leave certain collections unpaid—maybe they disagree with a charge, or feel a fine is unfair. Here are a few common “moral stand” collections: Disputed phone bills COVID-related fines Traffic tickets Unpaid spousal or child support While you might feel justified, lenders don’t take sides. They’re not interested in why a collection exists—only that it hasn’t been dealt with. And if it’s still active, that could be enough to derail your mortgage application. How Can You Find Out What’s On Your Report? Easy. You can check it yourself through services like Equifax or TransUnion, or you can work with a mortgage advisor to go through a full pre-approval. A pre-approval will quickly uncover any credit issues, including collections—giving you a chance to fix them before you apply for a mortgage. What To Do If You Have Collections Verify: Make sure the collection is accurate. Pay or Dispute: Settle the debt or begin a dispute process if it’s an error. Get Proof: Even if your credit report hasn’t updated yet, documentation showing the debt is paid can be enough for some lenders. Work With a Pro: A mortgage advisor can help you build a strategy and connect you with lenders who offer flexible solutions. Collections are common, but they can absolutely block your path to mortgage financing. Whether you knew about them or not, the best approach is to take action early. If you’d like to find out where you stand—or need help navigating your credit report—I’d be happy to help. Let’s make sure your next mortgage application has the best possible chance of approval.