Rebuilding Credit with a Mortgage

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For many Canadians, building and maintaining a strong credit score can be a crucial step on the path towards financial stability. Unfortunately, it can be difficult to preserve or grow your credit score if there is already existing damage, be it from past financial struggles, missed payments, or high debts. In such cases, many Canadians search for the fastest ways to rebuild their credit. What often surprises many is that a mortgage can be just the thing you need to begin rebuilding and improving your credit score. In fact, a number of credit rebuilding programs in Canada are centred around leveraging your mortgage payments to achieve better financial health.

How a Mortgage Can Help Rebuild Your Credit Score

While a mortgage is a type of debt, and too much debt can be detrimental to your credit score, there are also many ways in which a mortgage can help you rebuild a damaged score. As an oversimplification, your credit score is essentially a measure of how likely you are to repay your debt. As such, one of the easiest ways to rebuild your credit score is by establishing a history of repayment. Most mortgages offer a structured repayment plan, giving you an opportunity to demonstrate responsible payment behaviour over an extended period of time. Consistent, on-time mortgage payments will slowly but surely grow your credit score. Timely and consistent payments will reflect your ability to manage debt responsibly, thereby boosting your creditworthiness.

On top of establishing a strong history of repayment, your mortgage can also increase your credit score in other, less obvious, ways. For instance, having diverse types of debt (car loan, credit card, mortgage, etc.) and repaying all of your debts on time will increase your credit score faster than only having and repaying one type of debt. By adding a mortgage to your existing credit mix, you will prove your creditworthiness to a more significant degree with each month that passes—assuming that you make all of your required payments.

Credit Repair through Homeownership: A Long-Term Approach to Financial Health

Taking out a mortgage will not repair your credit overnight. It will, however, be a great stepping stone towards long-term credit health and financial stability. Owning a home inherently encourages financial health, through careful budgeting and long-term planning . Making consistent mortgage payments demonstrates your fiscal responsibility and commitment to meeting financial obligations, which will positively influence your credit scores over time.

Another key component of your mortgage is the equity you build over time. Mortgage payments contribute to building equity, steadily increasing your net worth. As your equity grows, it offers you a cushion against unforeseen financial setbacks, and can even provide you opportunities for future financial endeavours. For this reason, many Canadians prefer to purchase a home rather than rent one—if they can afford to do so.

Homeownership also comes with tax advantages, such as deductions on mortgage interest and property taxes. You can take advantage of these benefits and use them to free up funds that can be reinvested to manage your debt more effectively. You can also invest your savings in other financial areas, which will also, albeit indirectly, help with your credit repair efforts.

Mortgage Payment Strategies for Improving Creditworthiness and Achieving Your Financial Goals

There are a few different strategies you can employ to improve your creditworthiness and achieve your financial goals. The first strategy is to make consistent and on-time mortgage payments. There is often no grace period allowing you to pay your mortgage a few days after your deadline—timely payment of your mortgage is pivotal. Setting up automatic payments or reminders can help ensure payments are made promptly, avoiding any negative impact on your credit score due to late payments.

Making additional payments towards the principal balance or paying more than the minimum monthly instalment can also expedite debt reduction. Lowering the overall debt burden demonstrates responsible financial management and will positively impact your credit score. Another strategy you may want to consider involves checking on your credit reports annually (or more frequently). Regularly monitoring credit reports allows you to identify errors or discrepancies that might affect your credit score. Addressing these issues promptly can prevent any negative impact on your creditworthiness.

Still wondering if a mortgage is the best choice for you? Clover Mortgage can help. Our trusted team of brokers can help you find the perfect solution for your unique financial needs. Contact us to schedule a free consultation today!


Can you build credit with a mortgage?

Yes, you can build credit with a mortgage. A mortgage is a type of instalment loan, and responsible management of this loan can positively impact your credit score and overall creditworthiness. Here are several ways a mortgage can help build credit:

  • Payment History: Consistently paying your mortgage on time demonstrates responsible borrowing behaviour to credit bureaus and can significantly boost your credit score
  • Credit Mix: Having a mix of credit, such as installment loans (like a mortgage) and revolving credit (such as credit cards), can positively impact your credit score.
  • Long-Term Credit History : A long history of on-time mortgage payments can significantly improve your credit over time.

Can I have a mortgage with bad credit?

Yes, it's possible to obtain a mortgage with bad credit , but it might be more challenging compared to getting a mortgage with a good credit score. Having a low credit score can affect your ability to qualify for a mortgage, and it might result in higher interest rates or less favourable loan terms. Other lenders may require you to put down a higher down payment to offset the greater risk you pose to them.

Having a cosigner or co-borrower with a better credit profile can also increase your chances of getting approved for a mortgage. Their creditworthiness might help offset the impact of your lower credit score, and you may be able to be approved for a mortgage together, even if you are rejected individually.

You can also consult with our Clover Mortgage brokers, who have years of experience working with lower credit scores. Our team can offer specific insights into specific loan programs or strategies suitable for your situation.

What is the fastest way to rebuild credit?

Rebuilding credit is a gradual process that requires consistency and responsible financial habits. While there's no overnight solution, several steps can help expedite the process of rebuilding credit:

  • Check your credit reports consistently
  • Make timely payments on all your debt (diverse debt is even better)
  • Reduce your overall debt (pay off your car, etc.)
  • Limit new credit applications, if they result in hard inquiries
  • Keep old accounts open (to increase the average age of your debt)
  • Be patient and consistent
  • Do not be afraid to seek help or outside counsel
Steven Tulman
Written By Steven Tulman
“Making the process of getting a mortgage an easy and enjoyable experience for every Clover Mortgage client!”