Credit and lender tiers
Credit requirements, read the way a lender reads them.
A score is a summary, not the decision. Lenders read the file underneath it — how long it is, how much of your available credit you use, and whether anything went wrong recently — and that reading decides which tier of lender you belong to.
Executive summary
What a lender actually reads
Under OSFI's Guideline B-20, federally regulated lenders are expected to assess a borrower's background and demonstrated willingness to service debt using reliable, independently sourced information. A bureau report is that evidence. It is read alongside income and equity, not in isolation — strong equity can offset a mediocre file, and a thin file undermines an otherwise strong application.
Minimums, policy and practice are three different things
Most confusion about "the credit score you need" comes from collapsing three separate layers into one number. They are not the same, and only one of them is published.
| Layer | Who sets it | Published? | Effect on your file |
|---|---|---|---|
| Regulation | OSFI, via Guideline B-20 | Yes | Requires assessment of willingness and capacity to repay; sets no score number |
| Insurer guidance | Default insurers on insured mortgages | Yes, in insurer documentation | Sets a minimum score and credit-history expectation for insurability |
| Lender policy | Each lender | No | Sets the tier, the rate, and what exceptions an underwriter may grant |
The practical consequence: anyone quoting one exact score that "every Canadian lender" requires is describing a convention, not a rule. Ask instead which tier your file lands in and what it costs.
Utilization is the fastest lever you control
Scoring models weigh the reported balance against the limit on each revolving account. The balance that matters is the one the creditor reports on its statement date — not the balance after you pay the bill. Paying in full every month can still report high utilization if the statement cuts before your payment lands.
Worked example: the cost of a carried balance
Collections, consumer proposals and bankruptcy
Derogatory items are assessed on three axes: how recent, how large, and whether the matter is resolved. A $180 telecom collection from four years ago, paid, is a conversation. An unpaid $9,000 collection reported last quarter is a decline at most A-lenders until it is settled.
- Open collections and judgments. Usually must be paid and evidenced before funding. Expect the lender to ask for a paid-in-full letter, not a receipt.
- Consumer proposal. Lenders generally look for the proposal to be fully discharged and for re-established credit afterwards — typically two active tradelines reporting satisfactorily for a period the lender specifies. Insured financing after a proposal is possible but policy-dependent.
- Bankruptcy. Same logic, longer clock, and lenders will ask for the discharge certificate and the statement of affairs.
- Tax arrears. Outstanding balances with CRA can rank ahead of a mortgage; they are usually a funding condition rather than a scoring issue.
None of these are permanent. What lenders price is the re-established pattern that follows them.
Which lender tier your file points to
| Tier | Typical profile | What to expect |
|---|---|---|
| Prime (banks, monolines) | Strong score, two-plus seasoned tradelines, no recent derogatory items, verifiable income | Best available pricing, full documentation, insured or uninsured |
| Near-prime / alternative | Bruised recent history, thin file, or income that prime documentation cannot capture | Higher rate, larger down payment, lender fee, shorter term with an exit plan |
| Private | Recent unresolved credit events, urgent timing, or property-driven deals | Equity-driven, short term, fees; used as a bridge, not a destination |
Failure modes and recovery
| What goes wrong | Recovery action | Realistic timeline |
|---|---|---|
| Revolving balances reported near the limit | Pay below roughly 30% of limit before the statement date | One reporting cycle |
| Closing an old card to tidy up | Keep the oldest account open and lightly used | Immediate, if not yet closed |
| New car loan taken during the financing condition | Defer any new credit until after closing | Immediate |
| Unpaid collection discovered on the bureau | Pay, obtain written confirmation, request bureau update | Days to weeks |
| Thin file — one recent tradeline | Add and season a second reporting tradeline | Months, not weeks |
| Rate shopping causing repeated hard pulls | Have one professional pull once and shop the same pull | Immediate |
Written and reviewed by the Canadian Mortgage Compass Editorial Desk. This page is general information for Canadian readers and is not mortgage, legal, tax, or financial advice, and not an offer of credit. Rules, rates, and lender policies change; confirm your own situation with a licensed mortgage professional in your province. Editorial policy · Corrections