How to Improve Your Credit Score Before Applying for a Mortgage

Your credit score is your financial passport when applying for a mortgage. The higher it is, the better the terms you’ll get—meaning lower interest rates, more lender options, and potentially saving tens of thousands of dollars over the life of your loan.

But what if your credit score isn’t where it needs to be? Can you fix it quickly before applying for a mortgage?

Absolutely.

This guide will show you:

• Steps to boost your credit score fast
• How to remove errors from your credit report
• How to manage your debt-to-income ratio for a stronger mortgage application

Let’s dive in.

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Step 1: Understand What Lenders Look For in Your Credit Score

Before we talk about improving your score, let's understand what lenders care about.

What’s a Good Credit Score for a Mortgage?

• Excellent (760+) – Best mortgage rates available
• Good (700-759) – Competitive rates with access to most lenders
• Fair (650-699) – Some lenders will approve, but rates may be higher
• Poor (600-649) – Limited lender options, often requiring a larger down payment
• Very Poor (Below 600) – High risk, may require a private mortgage or significant credit repair before approval

If your score is below 700, improving it before applying for a mortgage could save you thousands.

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Step 2: Boost Your Credit Score Quickly

If your mortgage application is coming up soon, here are some high-impact moves you can make right now.

1. Lower Your Credit Utilization Ratio

Credit utilization is how much of your available credit you’re using. Lenders want to see a utilization rate below 30%.

• If you have a $10,000 credit limit, you should be using no more than $3,000 at any time.
• If your balance is higher than 30%, consider paying it down before your next statement date—this can quickly boost your score.

Example:
John had a $5,000 limit on his credit card and was carrying a $4,500 balance (90% utilization). By paying it down to $1,200, his credit score jumped 40 points in one month.

2. Ask for a Credit Limit Increase

If paying down debt isn’t an option right now, you can lower your utilization ratio by increasing your credit limit.

• Call your credit card company and ask for a limit increase (as long as you don’t increase your spending).
• If your limit goes from $5,000 to $10,000, that drops your utilization instantly without paying off any debt.

3. Make Payments on Time—Every Time

Payment history is the biggest factor in your credit score (35% of your score). Even one missed payment can drop your score by 50+ points.

• Set up auto-pay for at least the minimum payment to never miss a due date.
• If you’ve missed a payment, catch up ASAP—creditors may not report a late payment if it's less than 30 days overdue.

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Step 3: Remove Errors from Your Credit Report

Mistakes on your credit report can hurt your score—and they happen more often than you’d think. A study by the Financial Consumer Agency of Canada found that 1 in 5 credit reports contain errors.

How to Check Your Credit Report

In Canada, you can check your credit report for free through:

• Equifax Canada
• TransUnion Canada

You should pull your credit report from both bureaus—sometimes, an error appears on one but not the other.

Common Errors to Watch For

• Incorrect late payments – Payments you actually made on time.
• Accounts that don’t belong to you – Someone else’s debt showing up under your name.
• Incorrect balances – Your credit cards or loans showing higher balances than they should.
• Old negative items – Missed payments or collections that should have been removed.

How to Dispute Credit Report Errors

1. Identify the error – Highlight any incorrect information.
2. Gather evidence – Find payment records, bank statements, or any documents proving the mistake.
3. Contact the credit bureau – File a dispute with Equifax and TransUnion online or by mail.
4. Follow up – Credit bureaus must investigate and respond within 30 days.

Example:
Sarah found a $1,200 collection on her report from a phone bill she never had. After disputing it with Equifax, the error was removed in three weeks, and her score jumped 50 points.

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Step 4: Manage Your Debt-to-Income Ratio for a Stronger Application

Your debt-to-income ratio (DTI) is how much of your monthly income goes toward debt payments. Lenders use this number to determine how much mortgage you qualify for.

How to Calculate Your DTI

DTI = (Total Monthly Debt Payments ÷ Gross Monthly Income) × 100%

Example:

• John earns $6,000 per month.
• He pays $1,200 for his car loan and credit cards.
• His DTI is 20% ($1,200 ÷ $6,000).

What DTI Do Lenders Want?

✔️ Under 35% – Strong financial position, qualifies for best mortgage rates.
✔️ 35-42% – May qualify, but with stricter lending requirements.
✔️ 42%+ – Higher risk; may need to pay off debt before getting approved.

How to Improve Your DTI

✔️ Pay down high-interest debt – Focus on credit cards and personal loans first.
✔️ Avoid taking on new debt – Hold off on buying a car or financing furniture before applying for a mortgage.
✔️ Increase your income – Side gigs, bonuses, or rental income can improve your DTI.

Example:
Mike had a 42% DTI, which made it hard to qualify for a mortgage. He paid off his car loan, dropping his DTI to 32%, which improved his mortgage approval odds.

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Final Thoughts: A Strong Credit Score = A Better Mortgage Deal

Taking a few months to improve your credit score and debt ratio can mean the difference between:

✔️ Getting approved vs. being denied
✔️ Securing a low rate vs. paying thousands more in interest
✔️ Qualifying for a higher mortgage vs. getting stuck with a smaller loan

Quick Recap:

✔️ Lower your credit utilization – Pay down balances or ask for a limit increase.
✔️ Make all payments on time – Even one missed payment can hurt your score.
✔️ Dispute errors on your credit report – Removing mistakes can boost your score instantly.
✔️ Reduce your debt-to-income ratio – Pay down debt and avoid new loans before applying.

Need help preparing for your mortgage application? Let’s chat and build a strategy to get you the best possible mortgage approval!