Resources & Insights

Original perspectives and personal viewpoints on developments and industry trends.

Market Memo: A mortgage is good for your credit score

  • First National Financial LP

In a housing market where affordability is a key concern, and home-buying consumers are borrowing ever greater amounts of money, it is reassuring to note that a growing number of mortgage holders in Canada have sound credit scores.

A report from Canada Mortgage and Housing Corporation, using data gathered in 2017, shows that nearly 81% of mortgages in Canada were held by borrowers with a very good or excellent credit score.  And that number has been trending upwards since late 2015.  The number of mortgage holders with an excellent credit score in 2017 increased by 1 full percentage point compared to 2016.

At the other end of the scale the number of mortgage holders with a fair or poor credit score dropped to 10.2% in Q1-2017, down a full percentage point from Q1-2015.

In general, consumers with a mortgage tend to have a better credit score than those without a mortgage.  In the first quarter of 2017 about 77% of consumers without a mortgage had a very good or excellent score, nearly 4 full points lower than those with a mortgage.  CMHC finds this gap has been widening since 2014.

Looking at the lower end, the report finds about 15% of consumers without a mortgage had a poor or fair credit score, 5 percentage points higher than consumers with a mortgage.

Interestingly, the report finds that the country’s two hottest markets have seen the greatest improvement in credit scores.  In Toronto and Vancouver mortgage holders with a very good or excellent score have increased by 3.7 and 2.4 percentage points, respectively, since 2013.

At the same time Toronto and Vancouver show the largest decreases in the number of mortgage holders with a fair or poor credit score – the numbers falling by 2.9 and 1.8 percentage points, respectively, over the same period.

Consistent with the trend mentioned earlier CMHC finds that, in each of Canada’s six largest markets, the proportion of consumers with poor or fair credit scores is smaller among mortgage holders than among consumers without a mortgage.