Credit Improvement – Strengthen Your Financial Profile
Credit Improvement – Strengthen Your Financial Profile with Invis
Improve Your Credit Score and Secure Better Mortgage Terms
Your credit score plays a crucial role in determining your ability to secure a mortgage with competitive interest rates and favorable terms. If your credit score is lower than expected, you may find it difficult to get approved for a mortgage or may only qualify for high-interest loans.
At Invis, we understand that credit improvement is an essential step for many homebuyers looking to qualify for a mortgage. Our credit improvement program is designed to help clients boost their credit scores, giving them the financial confidence they need before applying for a home loan.
Whether you are a first-time homebuyer, self-employed, or working on rebuilding your credit, our mortgage brokers can guide you through a personalized credit improvement plan to help you achieve your homeownership goals.
What Is a Credit Score?
A credit score is a three-digit number that reflects your financial health and creditworthiness. In Canada, credit scores range from 300 to 900, with higher scores indicating a stronger ability to manage debt responsibly.
Your credit score is calculated by Canada’s two main credit bureaus:
These agencies assess your financial behavior based on several key factors, which determine your overall score.
What Affects Your Credit Score?
Your credit score is influenced by multiple factors, each playing a role in determining your overall financial health. Lenders use this score to evaluate how likely you are to repay borrowed money on time. In Canada, Equifax and TransUnion calculate credit scores based on the following five major factors:
1. Payment History (35%) – The Most Important Factor
Your payment history is the single most significant factor in your credit score, accounting for 35% of the total calculation. It reflects your ability to make payments on time for credit cards, loans, lines of credit, and other financial obligations.
Key factors within payment history:
- On-time payments – Making payments on or before the due date positively impacts your credit score.
- Late or missed payments – Payments that are 30 days late or more will be reported to the credit bureau and can cause a substantial drop in your score.
- Frequency of late payments – Repeated late payments indicate financial instability, making lenders more cautious about approving loans.
- Accounts in collections – If a lender sends your unpaid debt to a collections agency, it will appear on your credit report and severely impact your credit score.
- Bankruptcies, consumer proposals, or foreclosures – These negative marks stay on your credit report for up to seven years, making it difficult to obtain financing.
How to improve your payment history:
- Set up automatic payments to avoid missing due dates.
- If you miss a payment, pay it as soon as possible—a 60-day late payment is more damaging than a 30-day late payment.
- Always pay at least the minimum balance on your credit accounts to keep them in good standing.
2. Credit Utilization (30%) – How Much Credit You’re Using
Your credit utilization ratio measures how much of your available credit you are using. It makes up 30% of your credit score, making it the second most critical factor.
A high credit utilization ratio (using too much of your available credit) signals to lenders that you may be financially overextended and at risk of missing payments.
Example of credit utilization:
- If you have a credit card with a $10,000 limit and you use $7,000 of that limit, your credit utilization is 70%, which is considered high and may negatively impact your score.
- Ideally, you should keep your credit utilization below 30% to maintain a healthy credit score.
How to improve your credit utilization:
- Pay down balances regularly to keep your credit usage low.
- Increase your credit limit (if you are responsible with spending) to lower your utilization percentage.
- If you have multiple credit cards, spread out purchases instead of maxing out one card.
3. Length of Credit History (15%) – The Longer, the Better
The length of your credit history accounts for 15% of your credit score. Lenders prefer borrowers with a long history of responsible credit usage, as it demonstrates experience in managing debt over time.
Key components of credit history length:
- Oldest credit account – The longer your oldest active account has been open, the better it is for your score.
- Average age of accounts – If you frequently open new credit accounts, it lowers the overall average age of your accounts, which may reduce your score.
How to improve your credit history length:
- Keep old credit accounts open even if you do not use them frequently. Closing an old credit card shortens your credit history and reduces your available credit limit, which can negatively impact your score.
- If you are new to credit, consider becoming an authorized user on a family member’s long-standing credit card to help establish history.
4. Credit Inquiries (10%) – Hard vs. Soft Credit Checks
Every time you apply for a new credit product (credit card, loan, mortgage), the lender will perform a hard credit inquiry, which can temporarily lower your credit score.
Types of credit inquiries:
- Soft Inquiries (No Impact) – These include checking your own credit score, pre-qualifications for loans, and employer background checks. Soft inquiries do not affect your credit score.
- Hard Inquiries (Temporary Impact) – These occur when lenders check your credit before approving a new credit product. Multiple hard inquiries in a short period may signal risk to lenders, slightly lowering your score.
How to manage credit inquiries wisely:
- Avoid applying for multiple credit products in a short period, as each application results in a hard inquiry.
- Rate shop efficiently – When looking for a mortgage or auto loan, multiple inquiries within a 14-45 day period are usually counted as one single inquiry by credit bureaus.
- Check your credit report before applying – Ensure your score is in good shape before submitting credit applications.
5. Credit Mix (10%) – The Variety of Credit You Use
A diverse credit profile makes up 10% of your credit score and shows lenders that you can manage different types of credit responsibly.
Types of credit accounts that contribute to a strong credit mix:
- Revolving Credit (Credit Cards, Lines of Credit) – These accounts allow you to borrow and repay flexibly, as long as you stay within your credit limit.
- Installment Credit (Mortgages, Auto Loans, Personal Loans) – These require fixed monthly payments over a specific term.
- Retail Credit (Store Cards, Buy-Now-Pay-Later Programs) – Often used for department store or online purchases, these accounts also impact your credit mix.
How to improve your credit mix:
- If you only have one type of credit, consider adding another type, such as a small installment loan or a line of credit, to diversify your profile.
- Avoid opening multiple accounts at once, as this may negatively impact your score due to multiple hard inquiries.
Why Understanding These Factors Is Important
Knowing how your credit score is calculated allows you to take proactive steps toward credit improvement. If your score is lower than you would like, focusing on payment history, credit utilization, and credit history length can help improve it over time.
At Invis, our mortgage brokers work with clients to develop customized credit improvement plans, ensuring they are financially prepared for mortgage pre-approval and can secure the best possible mortgage rates.
If you need guidance on credit improvement strategies, contact Invis today to start working on a stronger credit profile that sets you up for homeownership success.
How Does My Credit Score Affect My Mortgage Pre-Approval?
When applying for a mortgage pre-approval, lenders use your credit score to assess your ability to repay a loan. The higher your credit score, the more favorable mortgage terms you can secure.
Credit Score Requirements for Mortgage Approval in Canada
In Canada, the minimum credit score required for a mortgage pre-approval varies depending on the lender and the type of loan.
| Credit Score Range | Mortgage Eligibility |
| 680 and Above | Qualifies for the best mortgage rates and terms. |
| 600 – 679 | Eligible for most mortgages but may not receive the lowest rates. |
| 500 – 599 | May qualify for alternative or high-risk lender mortgages with higher interest rates. |
| Below 500 | Unlikely to qualify for a mortgage without significant credit improvement. |
Why a Higher Credit Score Matters for Your Mortgage Pre-Approval
- Lower Interest Rates: A higher credit score allows you to qualify for lower mortgage interest rates, reducing your monthly payments.
- Higher Loan Amounts: Lenders are more willing to approve larger mortgage amounts for borrowers with strong credit.
- More Loan Options: A good credit score expands your options to prime lenders, avoiding private or high-risk lenders.
If your credit score is below 600, a credit improvement plan can help boost your chances of securing a pre-approved mortgage at favorable terms.
Does My Mortgage Affect My Credit Score?
Yes, your mortgage can significantly impact your credit score, both positively and negatively.
How a Mortgage Can Improve Your Credit Score
- Consistent On-Time Payments: Making your mortgage payments on time each month improves your credit history, which is the most important factor in your score.
- Diversifying Your Credit Mix: A mortgage is considered an installment loan, adding to your credit mix and strengthening your credit profile.
How a Mortgage Can Hurt Your Credit Score
- Late or Missed Payments: If you miss a mortgage payment, it can cause a significant drop in your credit score and impact your ability to obtain future loans.
- High Debt Load: Taking on too much mortgage debt relative to your income can affect your debt-to-income ratio, making future borrowing more difficult.
- Foreclosure or Bankruptcy: If you default on your mortgage, it will severely damage your credit score and remain on your report for up to seven years.
A mortgage broker at Invis can help you manage your mortgage responsibly to ensure it improves your credit score rather than damaging it.
Credit Improvement Program – How to Improve Your Credit Score
If your credit score is low, a credit improvement program can help you boost it before applying for a mortgage pre-approval.
Steps to Improve Your Credit Score
1. Check Your Credit Report for Errors
- Obtain a free credit report from Equifax and TransUnion.
- Dispute any errors or fraudulent activity that may be affecting your score.
2. Pay Off Outstanding Debts
- Prioritize paying down high-interest debt, such as credit cards.
- Consider a debt consolidation plan to simplify payments.
3. Set Up Automatic Payments
- Late payments can drastically reduce your credit score.
- Automating your bill and loan payments ensures on-time payments every month.
4. Reduce Credit Utilization
- Keep your credit card balances below 30% of your total credit limit.
- If possible, increase your credit limit to improve your utilization ratio.
5. Avoid Opening Too Many New Credit Accounts
- Each new credit application results in a hard inquiry, which can lower your score.
- Only apply for necessary credit products to avoid negative impacts.
By following a credit improvement plan, you can raise your credit score and increase your chances of securing an affordable mortgage.
How Invis Can Help with Credit Improvement and Mortgage Planning
At Invis, we understand that credit improvement is a key step toward homeownership. Our mortgage brokers work closely with clients to develop personalized credit improvement plans, helping them secure the best mortgage rates available.
Why Choose Invis for Credit Improvement?
- Expert Mortgage Guidance: We assess your financial situation and help you improve your credit score before applying for a mortgage.
- Access to Multiple Lenders: We work with a wide range of lenders, including those who offer flexible mortgage options for borrowers rebuilding credit.
- Customized Credit Improvement Plans: We create tailored strategies to help increase your credit score and qualify for better mortgage terms.
Get Started with a Credit Improvement Consultation
Are you ready to improve your credit score and secure the best mortgage terms? At Invis, our mortgage brokers are here to guide you every step of the way.
Contact us today to start your journey toward financial stability and successful homeownership.