Key takeaways
- Credit utilization is the share of your revolving credit limits you are using, and it is a major credit score factor in Canada.
- Many Canadian banks and educators suggest keeping balances below about 30% of each limit and overall; lower can be better.
- Before a mortgage application, lenders look beyond the score to your debt-service ratios, recent behaviour and whether balances are rising or falling.
- Paying down high-interest cards, avoiding maxed-out accounts and not closing old cards too quickly can help your profile look more stable.
If you are planning to buy a home in the next 6 to 24 months, one of the most practical credit moves you can make is lowering your credit card and line of credit balances. In Canada, credit bureaus such as Equifax and TransUnion consider credit utilization a major part of your credit score, alongside payment history, length of history, credit mix and new credit inquiries.
What credit utilization means
Credit utilization is the percentage of your revolving credit limit that you are using. For example, if a credit card has a $5,000 limit and the balance is $2,000, the utilization on that card is 40%. Many Canadian banks and credit educators suggest keeping utilization below about 30% of each credit limit and below about 30% overall. Lower utilization, such as under roughly 10% to 20%, is generally viewed more favourably.
This does not mean 30% is a magic line where everything above it is bad and everything below it is perfect. It is better to think of utilization as a risk signal. A maxed-out card can suggest financial pressure, while a lower balance relative to the limit suggests you are using credit with more room to manage surprises.
Why it matters before a mortgage
Mortgage lenders do not rely on your credit score alone. They also review your income, employment, debts and debt-service ratios. Under OSFI-aligned lending guidelines, lenders commonly use Gross Debt Service and Total Debt Service limits when assessing affordability, including the proposed mortgage payment, property taxes, heating costs and other debt payments.
That is why revolving debt can matter in two ways. First, higher utilization can weigh on your credit score. Second, the monthly payment on that debt can affect your Total Debt Service ratio. Two borrowers with similar credit scores may be viewed differently if one has balances trending down and the other has cards close to their limits or recent high-cost borrowing.
Practical ways to lower utilization
- Prioritize high-interest credit cards and any accounts near 80% to 90% of the limit, because they are costly and can signal higher risk.
- Make mid-cycle payments if you can, so balances stay lower rather than only dropping after the statement is issued.
- Avoid cash advances and maxed-out cards, especially in the months leading up to a mortgage application.
- Do not close multiple old cards at once, because that can reduce your available credit and may shorten your credit history.
- If appropriate, consider a limit increase without increasing spending, but be careful if it requires a hard inquiry.
What not to do right before applying
In the 6 to 12 months before applying for a mortgage, be cautious with new credit. Multiple new credit cards, store cards, car loans, payday loans or high-cost instalment loans can create hard inquiries, reduce your average account age and make your file look less stable. Debt consolidation can help in some cases, but it is only useful if it lowers your rate or payment, you do not re-borrow on the cleared cards, and you leave enough time for the new profile to settle.
A Finevo advisor can help you review how your credit balances may affect a future mortgage application, compare options across 40+ Canadian lenders, and build a practical timeline for improving your profile before you apply.
This article is general information about Canadian mortgages and is not financial advice. Rates, programs, and eligibility are subject to change and to lender and insurer qualification. Figures cited reflect market conditions at the time of writing. Speak with a licensed Finevo advisor for guidance specific to your situation.
