Your credit score is one of the most powerful factors in determining whether you'll be approved for a mortgage—and what interest rate you'll pay. A difference of just 50-100 points can translate into thousands of dollars saved over the life of your loan.
The good news? Credit scores aren't set in stone. With strategic effort over the next six months, you can significantly improve your score and position yourself for better mortgage terms. Here's how to make it happen.
Before diving into improvement strategies, it's important to understand what makes up your credit score. In Canada, credit scores range from 300 to 900, with most mortgage lenders looking for a minimum of 650-680 for approval.
Your score is calculated based on five key factors: payment history (35%), credit utilization (30%), length of credit history (15%), types of credit (10%), and recent credit inquiries (10%). Payment history carries the most weight, which means consistently paying bills on time is your most powerful tool for improvement.
Start by getting your hands on your actual credit report. In Canada, you can request free reports from Equifax and TransUnion. Review every line carefully—errors are more common than you might think. Incorrect late payments, accounts that aren't yours, or outdated information can drag down your score unfairly.
If you spot errors, dispute them immediately. The credit bureaus are required to investigate within 30 days. This alone could give your score a quick boost if inaccuracies are corrected.
Next, tackle your credit card balances. Credit utilization—the percentage of your available credit you're using—has a massive impact on your score. If you're carrying balances close to your credit limits, this is hurting you. Aim to get your utilization below 30% across all cards, and ideally below 10% for maximum impact.
Set up automatic payments for at least the minimum amount due on every account. Even one missed payment can drop your score by 50-100 points, and it stays on your report for six years in Canada. Automation removes the risk of forgetting a payment.
By now, you should have corrected any errors and established consistent on-time payments. It's time to optimize further.
If you have multiple credit cards, focus on paying down the ones with the highest utilization first. For example, if you have one card that's 80% maxed out and another at 20%, prioritize the 80% card. High utilization on even one card can drag down your overall score.
Consider requesting credit limit increases on cards where you have a good payment history. This can instantly lower your utilization ratio—as long as you don't increase your spending. Call your credit card issuer and ask for a limit increase. Many will approve this without a hard credit inquiry, especially if you've been a customer for several years.
Here's a counterintuitive tip: don't close old credit cards. The length of your credit history matters, and closing accounts reduces your total available credit, which increases your utilization ratio. Even if you're not using a card, keeping it open (and occasionally making a small purchase) helps your score.
If you're dealing with collections or severely past-due accounts, this is the time to address them. Contact creditors to negotiate payment plans or settlements. While paying off a collection won't immediately remove it from your report, having a "paid" status is better than "unpaid" in the eyes of lenders.
You're in the home stretch. At this point, the most important thing you can do is maintain perfect payment history. Don't let any bills slip—not your credit cards, not your car payment, not even your phone bill. Every payment counts.
Avoid applying for new credit during this period. Each hard inquiry can temporarily drop your score by a few points, and multiple inquiries raise red flags for mortgage lenders. If you need to make a major purchase, wait until after your mortgage closes.
Keep your credit card balances as low as possible—ideally paying them off in full each month. Even if you've been doing this all along, it's especially critical now as you approach your mortgage application.
If you have limited credit history or are rebuilding from scratch, credit builder loans or secured credit cards can help. These products are designed specifically to build credit. With a secured credit card, you make a deposit that becomes your credit limit. Use it responsibly, and you'll see your score climb.
However, if you're working within a six-month timeline, focus on optimizing existing accounts first. New accounts can temporarily lower your score, and they take time to positively impact your credit history.
While improving your credit score, don't forget about income stability. Lenders look at your debt-to-income ratio alongside your credit score. Even with a perfect score, you'll struggle to get approved if your income can't support the mortgage payment.
During these six months, avoid changing jobs if possible. Lenders prefer to see stable employment history. If you must switch jobs, staying in the same industry or getting a promotion is better than a complete career change.
How much can you realistically improve your score in six months? It depends on your starting point. If you're dealing with recent late payments or maxed-out cards, you could see gains of 50-100 points or more. If you're starting from a higher baseline with just minor issues, improvements might be more modest—but every point counts.
Credit scoring models update regularly as your creditors report new information, typically monthly. This means positive changes can show up relatively quickly. Paying down a high-balance credit card could improve your score within 30-60 days of the balance being reported.
Monitor your progress, but don't obsess over daily fluctuations. Check your score at the beginning of your six-month journey, then monthly thereafter. Many Canadian banks offer free credit score monitoring through their apps, which uses a "soft inquiry" that doesn't affect your score.
About 30 days before you plan to apply for a mortgage, do one final check of your credit report. Make sure everything is accurate and up to date. This gives you time to address any last-minute issues before lenders pull your credit.
Let's talk numbers. A borrower with a 680 credit score might qualify for a mortgage, but they'll pay a higher interest rate than someone with a 750 score. On a $400,000 mortgage, a rate difference of just 0.5% amounts to approximately $50,000 more in interest over 25 years.
That's why the effort you put into improving your credit score now pays dividends for decades. The few months of discipline—paying down balances, avoiding late payments, not opening new accounts—can save you the equivalent of a luxury car over the life of your mortgage.
Life doesn't always give us a perfect timeline. If you need to apply for a mortgage sooner, you can still make meaningful improvements in 90 days or even 60 days. Focus on the highest-impact actions: correct credit report errors, pay down high-utilization cards, and ensure perfect payment history.
Even small improvements can make a difference. Moving from a 640 to a 660 score might not seem dramatic, but it could be the difference between approval and denial, or between a standard rate and a subprime rate.
Improving your credit score isn't just about getting a mortgage—it's about building better financial habits that will serve you for life. The discipline of paying bills on time, keeping debt manageable, and monitoring your credit is the foundation of financial health.
As you work through these six months, you'll likely notice changes beyond your credit score. You might feel less financial stress, have a clearer picture of your spending, and develop confidence in managing money. These intangible benefits are just as valuable as the score itself.
The journey to a better credit score isn't complicated, but it does require consistency and patience. Start today, stay focused on the fundamentals, and six months from now, you'll be in a much stronger position to secure the mortgage you need.
Now that you understand how to improve your credit score, take the next step toward homeownership. Get pre-approved and discover what you qualify for.