Credit Rating

What is a Credit Rating and How Will it Affect my Mortgage?

Your credit rating is a measure of your credit-worthiness based on your record of borrowing and repayment.  Typically, a credit rating tells a lender the probability of a borrower being able to pay back the loan.  When applying for a mortgage, lenders base their decision to lend out money largely on the borrower's credit history, so without a credit rating, few institutions will lend to you.
Governed by provincial laws, the credit bureau - the clearing-house of information on consumers' use of credit - provides a credit history for each individual, which is a list of facts about how you handle debt. This information is gathered from financial institutions, retailers and other lenders. Most of your credit information remains on your file for seven years, so if you're looking to get a mortgage, it's important to ensure you're building a good credit rating.

How Can You Build a Good Credit Rating?

Establishing a good credit history or rating is extremely important in order to get decent rates when you're ready to buy a home.

Here are some ways you can build a good credit rating:

  • Pay your bills promptly, especially credit cards
  • Borrow only what you need and what you can afford
  • Try to pay off loans on time and as quickly as possible

Check Your Credit Rating

As a consumer, it's your right to know your credit rating. Credit can be denied to you based on inaccurate or insufficient information. You may want to check your file if you aren't sure of your credit rating, if you are refused credit, or if you plan to apply for a large amount of credit such as a mortgage. You can get a copy of your credit report through one of the many credit bureaus across Canada for free or for a nominal charge.

Here are some helpful guidelines:

  • Contact your local credit bureau, which you can find in the Yellow Pages.  You'll be asked to provide identification to ensure the confidentiality of your file. A written report may take two to three weeks.
  • If you notice any errors and can offer written proof, your file will be changed immediately. If you can't supply written proof, notify the credit bureau, which will then investigate. If your facts are confirmed, your file will be updated.
  • If you see an error but proof cannot be found, what happens next depends on where you live. Each province has its own legislation relating to credit bureaus. The information you are challenging may be taken off your file or a note may be added, saying the information is "in dispute".
  • If an error has been corrected, the credit bureau must notify members who have inquired about you during previous months (as required by provincial law).

Dealing With a Personal Credit Crisis?


Do you have a bad credit rating, or are worried you may be on the verge of a personal credit crisis?  Chances are you have a credit problem if you:

  • Can't make your minimum monthly payments on your credit cards
  • Take cash advances for living expenses
  • Aren't sure how much you owe
  • Never seem to be out of debt
  • Here are some helpful tips to consider if you are having credit problems:
  • Put away all of your credit cards
  • If you have several debts, consider consolidating them into one consumer loan. You'll save on the interest rate alone, especially if your debt is from credit cards
  • If slow payments are affecting your credit rating, consider contacting your creditors to see if you can make alternative arrangements. Be honest with your creditors. Let them know you're in difficulty and work with them to find the best way to meet your financial obligations
  • Try and figure out how you got into debt.  Re-evaluate your spending habits and lifestyle.  Devise and stick to a plan to prevent it from happening again
  • Seek the advice of a credit counselor if you can't sort things out yourself. There are several not-for-profit credit counseling agencies across Canada . An experienced counselor will sit down with you to look at your situation, discuss your options and help you develop a course of action
  • When you begin to recover financially, consider keeping only one credit card. It will be easier to track your spending and you won't have the collective credit limit to tempt you