Your credit score affects almost everything in your financial life. Whether you’re buying your first home, adding to your rental property portfolio, or just trying to get better interest rates, your credit score matters.
Here’s what most people don’t know: you can damage your credit score even if you never miss a payment. And you can boost it without paying off a single dollar of debt. For investment property buyers specifically, see our guide on credit score optimization for mortgage approval. If you’re new to Canada and starting from zero, check out our guide on building Canadian credit fast as a newcomer investor.
Let me explain how this all works.
Check Your Credit Report First
Before you do anything else, pull your credit report. You can’t fix problems you don’t know exist.
I learned this the hard way. When I applied for my first mortgage, I got declined. I was shocked. I had never missed a payment on anything. Turns out, someone had opened a Best Buy credit card in my name, maxed it out, and never paid it. I had no idea until that moment.
Once I disputed it with Equifax, they removed it immediately. My score jumped, and I got my mortgage approved.
How to Get Your Credit Report
Equifax Canada gives you one free credit report every year. Just visit their website and request it. You can also pay for monthly monitoring if you want regular updates and alerts.
If you find something that isn’t yours, fill out their dispute form. They’ll investigate, and if the debt isn’t actually yours, they’ll remove it. Your score can jump instantly.
What Actually Determines Your Credit Score
Most people think credit scores are just about paying bills on time. That’s only part of it. Credit bureaus look at five different factors:
1. Payment History
This is whether you pay your bills on time or have late payments. Pretty straightforward.
2. Credit Utilization (30% of Your Score)
This is how much credit you’re using compared to what’s available. If you have $10,000 in total credit limits and you’re using $7,000, that’s 70% utilization. This factor is huge.
3. Age of Credit Accounts
Older accounts help your score. They show you’ve been managing credit responsibly for a long time.
4. Credit Mix
Bureaus want to see different types of credit. Credit cards, lines of credit, car loans, mortgages, even cell phone bills. People behave differently with different types of credit, so having a mix gives a better picture.
5. New Credit Inquiries (10% of Your Score)
Every time a lender checks your credit, it’s recorded. Too many checks in a short time hurts your score.
Here’s the kicker: your credit report spans seven years. That late payment from five years ago? Still on there, still affecting your score.
Knowing that credit utilization accounts for 30% of your score changes how you approach debt — book a free strategy call with LendCity and we’ll review how your credit profile affects your mortgage options.
The Credit Utilization Secret
Credit Utilization is one of the biggest factors in your score, but most people misunderstand how it’s calculated.
Not all debt counts toward utilization. Your mortgage, car loan, and student loans don’t really factor in. These are installment loans with fixed payments.
What matters is revolving credit: credit cards and lines of credit.
The Magic Number: 30%
Keep your total credit utilization under 30% of your available limits. If you have $10,000 in total credit limits, keep your balances under $3,000.
Between 30-70%? Your score will still improve as you pay down debt, just slower.
Above 70%? Your score can actually drop month after month, even if you never miss a payment. I’ve seen it happen to clients who were perfect with payments but had high balances.
Never Close Old Credit Cards
This might sound backwards, but closing credit cards hurts your score.
When you close a card, you lose that available credit. Your utilization percentage on remaining cards goes up instantly. You also lose the age of that account, which drops your average account age.
Instead of closing cards you don’t use, lock them in a safe. The open account with available credit helps your score, even if you never touch it.
Keeping old cards open and your balances under 30% can boost your score without paying off a single dollar — book a free strategy call with us and we’ll show you exactly where your credit stands for mortgage approval.
My Favorite Trick: The Credit Limit Increase
This is the fastest way to boost your score if your utilization is high.
Call your credit card company. Tell them you’ve been a customer for X years, you’ve paid on time, and you’d like a credit limit increase.
Here’s the math: Say you have a $5,000 limit with a $3,000 balance. That’s 60% utilization. If they increase your limit to $8,000, you now have 37.5% utilization with the same balance. Your score jumps without you paying anything.
The Trade-Off
They’ll need to check your credit to approve the increase. But here’s why it’s worth it:
- Credit utilization = 30% of your score
- Credit inquiries = 10% of your score
The benefit outweighs the cost.
Important Warning
If the first credit card company says no, stop. Don’t call five different companies. You’ll just rack up credit checks with no benefit.
And don’t spend the new available credit. The whole point is to lower your utilization ratio.
Not All Credit Cards Are Equal
Lenders view credit cards differently based on who issued them.
Cards from Capital One and MBNA? They have credit repair programs and approve almost anyone. So having one doesn’t impress lenders much.
Cards from TD, RBC, Scotiabank, BMO, or CIBC? These banks have stricter requirements. Having one shows you met higher standards.
If you only have alternative lender cards, try to get a bank card if you can qualify. It’ll boost how lenders see you.
Why Work With a Mortgage Broker
If you shop for mortgages on your own, you might apply at three different banks. That’s three credit checks.
A broker who shops multiple lenders checks your credit once, then shops your file to dozens of lenders. You get more options with fewer credit inquiries.
Same thing with car loans. Find the car first, then apply for financing at one dealership that can access multiple lenders.
Consider Debt Consolidation
If you’re carrying credit card debt at 20% interest, a consolidation loan might help.
Banks offer consolidation loans at 7-12% interest. You use the loan to pay off all your credit cards, then make one monthly payment on the consolidation loan.
How It Helps Your Credit
Your credit cards now show zero balances. Your utilization drops to almost nothing. Your score can jump significantly.
Plus, you’re paying way less interest, so more of your payment goes to principal. You’ll get out of debt faster.
Consolidation loans have fixed terms of one to seven years. You’ll know exactly when you’ll be debt-free.
Why a Higher Credit Score Matters
Better interest rates on everything. Even 0.5% less on a mortgage saves thousands of dollars.
More job opportunities. Some employers check credit reports. If they’re choosing between two equal candidates, credit history can be the deciding factor.
More lending options. Poor credit limits you to subprime lenders with worse terms. Understanding how debt ratios affect your approval helps you prepare.
The Bottom Line
Building credit takes time because your report spans seven years. But you can see improvements quickly if you focus on the right things. Even if you’ve had serious setbacks, read how one investor went from bankruptcy to real estate success.
Check your credit report for errors. Keep utilization under 30%. Don’t close old cards. Consider asking for limit increases if your utilization is high.
And remember: you can hurt your credit even with perfect payments if your utilization is too high. Credit scoring is more complex than most people realize.
Start with your free annual credit report from Equifax. See where you stand. Then pick one or two strategies from this article and get to work. When you’re ready, explore your Residential Mortgage Financing. If you’re new to Canada, also read how to get a mortgage as a newcomer or immigrant.
Frequently Asked Questions
How often should I check my credit report?
What's the best credit utilization percentage for my score?
Should I close credit cards I'm not using?
Will requesting a credit limit increase hurt my score?
How long do negative items stay on my credit report?
Does my mortgage count toward credit utilization?
Why do mortgage brokers help with credit inquiries?
Are all credit cards viewed the same by lenders?
Disclaimer: LendCity Mortgages is a licensed mortgage brokerage, and our team includes experienced real estate investors. While we are qualified to provide mortgage-related guidance, the broader financial, tax, and legal information in this article is provided for educational purposes only and does not constitute financial planning, tax, or legal advice. For matters outside mortgage financing, we recommend consulting a Chartered Professional Accountant (CPA), licensed financial planner, or qualified legal advisor.
Written by
LendCity
Published
December 22, 2025
Reading Time
8 min read
Credit Score
A numerical rating (300-900 in Canada) that represents your creditworthiness, affecting mortgage rates and approval. 680+ is typically needed for best rates.
Credit Utilization
The percentage of your available credit that you're using. Keeping this under 30% helps maintain a healthy credit score.
Principal
The original amount of money borrowed on a mortgage, not including interest. Each mortgage payment includes both principal (paying down what you owe) and interest (the cost of borrowing). Over time, more of each payment goes toward principal as the loan balance decreases.
Mortgage Broker
A licensed professional who shops multiple lenders to find the best mortgage rates and terms for borrowers. Unlike banks, brokers have access to dozens of lending options.
Debt Consolidation
Combining multiple debts into a single loan, often through refinancing your mortgage. Can lower overall interest costs and simplify monthly payments.
Interest Rate
The cost of borrowing money, expressed as a percentage. It determines how much you pay on top of the principal borrowed.
B Lender
Alternative lenders that serve borrowers who don't qualify with major banks, offering slightly higher rates with more flexible criteria.
Leverage
Using borrowed money (mortgage) to control a larger asset, amplifying both potential returns and risks on your investment.
A Lender
A major bank or institutional lender offering the most competitive mortgage rates and terms but with the strictest qualification criteria, including full income verification and stress test compliance. Most investors use A lenders for their first four to six properties.
Bankruptcy
A legal process where an individual or business declares inability to repay debts. Bankruptcy severely impacts credit scores and mortgage qualification for years, though recovery and re-entry into real estate investing is possible with time and rebuilt credit.
Hover over terms to see definitions, or visit our glossary for the full list.
- Credit Score Optimization for Investment Mortgage Approval
- Scaling from 5 to 20 Properties: The Financing Roadmap
- Building Canadian Credit Fast: A Real Estate Investor's Newcomer Playbook
- First-Time Investor Financing: Every Mortgage Option Available to You in Canada
- Common Mortgage Questions Answered: Down Payment & Rates