Understanding Your Credit Rating So That You Can Get a Mortgage

For many of us, debt is a way of life. Installment payments and credit cards can be useful financial tools. But if not controlled, credit eventually can control us.

To qualify for a mortgage loan, your credit history doesn’t have to be spotless, but your history must clearly show your willingness to manage and pay your debts.

Your credit report

Mortgage Credit ReportWhen you apply for a mortgage loan, one of the first things a mortgage broker or lender will want to look at is your credit record to see if you’ve been responsible about managing your debts. Your credit record is obtained from a credit bureau. This is an agency that gathers statistics on individual payment records on loans, credit cards and other debts. It is very important that you have credit history and that it is accurate.  You have a right to review and correct your credit history.  Click here for a short video on the importance of credit.

How to get a copy of your credit report for free

There are two credit bureaus in Canada.  TransUnion and Equifax.  You can order your credit report on-line, by telephone, or by mail.  The mail and telephone options are FREE, though you have to wait a week for mail delivery. When you access your own credit file, it does not count as an inquiry. Too many inquiries can lower your score.

Your credit report shows your credit history on file.  Your credit score is a calculated number representing the risk to the lender of providing you a loan. You can get your credit report with or without a credit score. The score costs you a fee. 

On-line (fee): You will need a credit card for this option.

Visit Equifax.ca or

Visit TransUnion.ca

By Telephone: You can request your FREE CREDIT REPORT in Canada simply...

Call Equifax Canada at 1-800-465-7166 or

Call TransUnion at 1-800-663-9980 (Option 1)

For both services, you will be prompted for information to verify your identity including the provision of a credit card number.  If you do not have a credit card, use the Mail option next.  The report will be mailed by Canada Post and should arrive in about a week.

By Mail: You can order your FREE CREDIT REPORT in Canada simply...

Download and complete the Equifax Mail-In Order Form

Download and complete the TransUnion Mail-in Order Form

For either of these mail-in services, you will be required to provide enlarged and legible photocopies of acceptable and current identification.

How to interpret your credit report

When you review your credit report, check it carefully for any past-due or written-off amounts. Remember that poor credit may prevent you from qualifying for a loan or make it more expensive to compensate for the increased risk. Make sure the credit report’s information about you is correct and be prepared to provide a written explanation for any late payments. 

Free Credit ReportBecause credit reports usually list account numbers, loan terms and various codes, you may find your report a little confusing.  We have located a FREE GUIDE called Understanding Your Credit Report and Credit Score available for download  It's produced by the Financial Consumer Agency and is a fantastic resource document to help you understand and interpret the credit reports above.

When you think you are ready for a mortgage preapproval, you will be able to authorize your mortgage broker to pull your credit information for you and review and explain any items with you that aren’t clear.  When a mortgage broker or any other credit provider accesses your credit report, the inquiry will show on your credit report.  Too many inquiries can lower your credit score.

How to fix your credit score

When it comes to bruised credit, banks will often say sorry, but “pay your bills on time and come back in 6 months”. This is not particularly helpful advice and often leads to refusal again in 6 months.  There are many factors involved in a person’s credit score and paying your bills on time is just one part.

Click here for a short course on credit repair.

Topics: Credit Fix, Mortgages 101, Credit Report