Why a Credit Check Is Essential for the Mortgage Process (And Why You Shouldn't Worry)

Tim Lyon • February 15, 2024

I get it. The idea of someone checking your credit can feel uncomfortable. Maybe you're worried about the impact on your score, or you're unsure what I'll find. Many clients feel this way before their first credit check.


Here's the truth: a credit check is one of the most valuable steps in any mortgage process. It protects you by revealing potential issues early, ensures I'm working with accurate information, and has minimal long-term impact on your credit score. Let me break down exactly why this matters and what you can expect.


Why Credit Checks Are Non-Negotiable

When I work on your mortgage, I need to see what lenders will see. This isn't about judgment. It's about accuracy and catching problems before they affect your approval or rate.


The consumer credit reports you can access for free (from Equifax, Credit Karma, Borrowell, and others) often show different scores than what lenders and I use. The difference varies by client and bureau, but it can be significant. If you think your score is 720 based on a consumer report, but lenders see 680, that's a problem we need to address upfront.


More importantly, some issues don't appear on consumer reports at all. I've had clients with old phone bills or closed credit cards showing missed payments on their lender report that weren't visible on their consumer report. These surprises can drag down your score and affect your mortgage options.


What Happens During a Credit Check

When I run your credit for a mortgage pre-approval, it's called a hard inquiry. Yes, this type of check does appear on your credit report and can have a small impact on your score.

Here's what you need to know:

  • The impact is minimal. Your score may dip slightly, but how much depends on your overall credit profile.
  • Recovery is quick. The effect diminishes over time, typically within a few weeks or months depending on your borrower profile.
  • Multiple mortgage checks count as one. If I check your credit and then a lender checks it during your application, those inquiries are grouped together as a single check. This applies as long as all checks happen within 45 days for Equifax or 2 weeks for TransUnion.
  • People with perfect credit have bureau checks too. I've seen clients with scores in the high 800s who have multiple inquiries listed. Credit checks are a normal part of financial life.


The Hidden Benefit: Catching Issues Early

This is where the credit check becomes invaluable. When I review your report, I'm looking for red flags that could hurt your approval or cost you a better rate:

  • Old accounts you forgot about with late payments dragging your score down
  • Errors or inaccuracies that need to be corrected
  • High credit utilization that's easy to fix
  • Signs of fraud or identity theft


If we find an issue, we have time to deal with it. Resolving problems with vendors or credit bureaus can take anywhere from days to weeks. Discovering these issues early gives us a buffer to fix them before we need to submit your application.


If we wait until you need urgent financing or you're up against a deadline, we may not have time to correct these issues. That could mean accepting a higher rate, having fewer lender options, or dealing with unnecessary stress.


Understanding Your Credit Score

Your credit score ranges from 300 to 900 and helps lenders evaluate how likely you are to repay your debts on time.

Here's how scores are generally viewed:

  • 760 and up: Excellent
  • 725 to 759: Very Good
  • 660 to 724: Good
  • 560 to 659: Fair
  • 300 to 559: Poor


Your score is calculated based on several factors:
  • Payment History (Most Important): Your repayment behavior, number and types of accounts, and whether you pay on time.
  • Credit Utilization: How much of your available credit you're using. Keeping your credit cards and lines of credit under 30% of their limits is ideal.
  • Length of Credit History: How long you've had your credit accounts. Longer is better, as long as accounts are in good standing.
  • Types of Credit: The variety of credit you manage responsibly (credit cards, lines of credit, car loans, student loans, mortgages).
  • Inquiries: How often your credit file is accessed. Multiple inquiries can signal financial stress, but mortgage-related inquiries within a short timeframe are grouped together.


Not all credit checks impact your score. Soft checks, including when you check your own score, are not counted against you.


Real-World Examples: Errors That Could Have Derailed Approvals

I've seen countless credit report errors over the years. Here are a few scenarios where catching these issues early made all the difference:


The Phone Bill in the Wrong Name

A client came to me with a credit score well below the acceptable threshold for approval. When I reviewed their report, I found a phone bill account with numerous missed payments dragging down their score.


They contacted the phone company and discovered the account didn't even belong to them. The provider had another customer with the same name and had been reporting to the wrong credit bureau. We got the issue resolved and the account removed from my client's report. Without catching this early, they wouldn't have been able to get approved.


The $4 Charge on a Closed Account

Another client closed a credit card in 2019 after paying off the full balance. What she didn't know was that a $4 charge was billed the month after she closed the account for some residual fee. Since the account was closed, she never saw the bill.


That $4 charge sat there reporting as a missed payment month over month, dramatically impacting her credit score. She was able to sort it out with the bank and provide proof to the credit bureau, who updated her profile accordingly.


I've seen multiple variations of these scenarios: accounts registered to the wrong name, old accounts that should have closed but didn't, charges appearing after closure. These errors happen more often than you'd think.


The Broker Advantage

Here's something most people don't know: as a mortgage broker, I have a special line to Equifax that allows me to get disputes resolved in days compared to the consumer process, which can take weeks to months. When we find an error, I can help expedite the resolution so it doesn't hold up your mortgage approval or cost you a better rate.


If my clients in these examples had waited until they were further into the mortgage process to run their credit, we wouldn't have had time to fix these issues. They could have been forced to accept higher interest rates, had fewer lender options, or been unable to buy the home they wanted.


Quick Summary

  • A credit check protects you by revealing what lenders will see and catching issues early, whether you're buying, refinancing, or renewing.
  • Consumer credit reports often show different scores than lender reports, and some issues don't appear on consumer reports at all.
  • Common errors include accounts in the wrong name, charges on closed accounts, and old accounts that should have been removed.
  • As a mortgage broker, I have a special line to Equifax that can resolve disputes in days instead of weeks to months.
  • The impact of a hard inquiry is minimal and recovers quickly (days to weeks depending on your profile).
  • Multiple mortgage-related credit checks within 45 days (Equifax) or 2 weeks (TransUnion) count as one inquiry.
  • Even clients with perfect credit scores have bureau checks listed on their reports.


Next Steps

Whether you're exploring mortgage options or have questions about your credit, don't let concern about a credit check hold you back. The information we gain is worth far more than any temporary, minor impact on your score.


Need help with your mortgage or have questions about your credit? Book a consultation or call 778-988-8409.


Glossary

Credit Bureau: An organization that collects and maintains credit information about consumers. In Canada, the two primary credit bureaus are Equifax and TransUnion.


Credit Utilization: The percentage of your available credit that you're currently using. For example, if you have a credit card with a $10,000 limit and a balance of $3,000, your utilization is 30%.


Hard Inquiry: A credit check that occurs when you apply for credit (like a mortgage), which appears on your credit report and may have a small, temporary impact on your score.


Lender Report: The credit report that mortgage lenders and brokers access, which may contain different information or scoring than consumer reports.


Soft Inquiry: A credit check that doesn't impact your score, such as when you check your own credit or when companies check your credit for pre-approval offers.


Trade Line: An account listed on your credit report, such as a credit card, line of credit, car loan, or mortgage.

Tim Lyon

Mortgage Consultant

How Rental Income Impacts Your Mortgage Approval (And Why Lender Choice Matters)

By Tim Lyon • January 20, 2026
If you are buying a home with a suite, keeping your current home as a rental, or already own a rental property, mortgage qualification can get confusing fast. The frustrating part is that you can do everything “right” and still get very different answers depending on which lender you talk to. Here’s a simple breakdown so you understand it and don’t miss out. What are Debt Service Ratios? In Canada, lenders qualify you using two main ratios: Gross Debt Service (GDS) This looks at housing costs only , typically: Mortgage payment Property taxes Heating 50% of strata fees (if applicable) GDS typically needs to be 39% or less of your gross income. Total Debt Service (TDS) This includes everything in GDS , plus other debts like: Car loans Credit cards Lines of credit Student loans TDS typically needs to be 44% or less of your gross income. These ratios are the foundation. If they do not work, the lender will not approve the mortgage, even with strong credit and a solid down payment. How Lenders Treat Rental Income Most people assume lenders look at rental properties based on simple cash flow (rent minus mortgage payment). In reality, most lenders use one of two methods: 1) Addback A percentage of the rental income is added to your gross income for qualification purposes. 2)Offset A percentage of the rental income is subtracted from the mortgage payment tied to the rental property. Different lenders use different percentages and different worksheets. That is why the same borrower can qualify with one lender and fail with another. Benefits of Understanding Lender Methods When you understand how rental income is calculated, you can: Avoid being under-qualified by a lender with conservative rules Get a more accurate picture of your real purchasing power Choose a lender that fits your situation (instead of forcing your situation to fit the lender) Important Considerations A few key points to keep in mind: Rental income is rarely counted at 100% , but some lenders are more generous than others. The method matters just as much as the percentage (addback vs offset). If you own multiple properties, lender worksheets can change the result dramatically. Your lender choice is a strategy decision , not just a rate decision. Real-World Example: Same Clients, Two Very Different Outcomes Here’s an example comparing lenders Scotiabank and Strive, using a fictitious couple: Scenario Household income: $160,000 Existing townhome: $800,000 value with a $525,000 mortgage ( $2,500/month payment) Market rent for the townhome: $3,400/month New purchase: property with a rental suite generating $1,800/month Down payment: 10% Other debts: student loan $165/month , car loan $500/month How Scotiabank viewed it For the townhome rental, they counted half the rent and subtracted the mortgage payment, leaving an $800/month shortfall that gets added into the debt ratios. For the new purchase, 50% of the suite income gets added to income. Max mortgage : $650,700 Max purchase price : $723,000 How Strive viewed it For the townhome rental, Strive used a rental worksheet and calculated $5.20/month of income that can be added to the application. For the new purchase, 100% of the suite income gets added to income, and they did not need to include taxes or heat. Max mortgage : $878,400 Max purchase price : $976,000 The result That’s a $253,000 difference in purchasing power , with the same clients, same income, same debts, and same properties. The difference was lender policy. Quick Summary GDS and TDS ratios are the backbone of mortgage qualification. Rental income is usually counted using Addback or Offset , and each lender handles this differently. Two lenders can produce wildly different results, even with the exact same file. In the example above, lender choice created a $253,000 swing in purchasing power. Next Steps If you are planning to: Buy a home with a suite Keep your current home and convert it to a rental Use rental income to qualify Reach out and I will run the numbers across multiple lenders so you see what you actually qualify for, not just what one lender will allow. Need help with your mortgage? Book a consultation or call 778-988-8409 . Glossary Addback : A method where a lender adds a percentage of rental income to your gross income for qualification. Gross Debt Service (GDS) : The ratio that measures housing costs as a percentage of gross income. Offset : A method where a lender subtracts a percentage of rental income from the rental property’s mortgage payment for qualification. Total Debt Service (TDS) : The ratio that measures housing costs plus other debts as a percentage of gross income.

Mortgage Renewal vs. Refinance: Understanding the Key Differences

By Tim Lyon • November 25, 2025
If you own a property with a mortgage, you've probably heard the terms "renewal" and "refinance" thrown around. While both involve obtaining a new term for your mortgage, there are some important differences to understand. Let's break down what each one means and when you might use them. Understanding Mortgage Basics In Canada, when you take out a mortgage, the payments are typically spread over 25 to 30 years. This period is known as the amortization. However, unlike in the U.S., Canadians do not keep the same interest rate and payment terms for the entire amortization period. Instead, you have an initial term, usually 3 to 5 years, after which you need to renew into a new term. For example, if you have a 25-year mortgage with 5-year terms, you will need to renew your mortgage four times throughout its lifespan. It's also common to have a mix of different term lengths over the course of your mortgage. What is a Mortgage Renewal? A mortgage renewal occurs at the end of your mortgage term. When you renew, you start a new term with a new interest rate while keeping the remaining details of your mortgage the same. The key element here is that the mortgage charge registered on your property's title remains unchanged. A renewal is straightforward and typically does not involve any significant changes to your mortgage agreement other than a new interest rate. Think of it as hitting the "continue" button on your mortgage, but at new rates. What is a Mortgage Refinance? A mortgage refinance is different. When you refinance, you are making changes to your original mortgage agreement. This means paying off your existing mortgage and registering a new one on your property's title. Essentially, you are taking out a completely new mortgage for the same property. People commonly refinance to: Access the equity in their home for investments or major purchases Consolidate high-interest debt into their lower-rate mortgage Extend the amortization period to reduce monthly payments and improve cash flow Make significant changes to their mortgage structure It's important to note that refinancing is not allowed for insured properties (those with less than a 20% down payment at purchase). This means the maximum loan amount in a refinance is 80% of your property value. What About Switching Lenders? If you want to keep everything the same but switch lenders for a better rate, this is known as a transfer. A transfer is a type of renewal where the original mortgage charge is transferred from one lender to another. Depending on the lenders involved, you might be able to make minor changes (like extending the amortization or changing borrowers) without needing a full refinance. Why Timing Matters Your mortgage maturity date is when your current term ends. This is the ideal time to either renew or refinance. If you refinance or switch lenders before the maturity date, you will face a prepayment penalty. If you refinance, renew or transfer at maturity, there is no penalty. Real-World Example A homeowner with a $450,000 mortgage is reaching the end of their 5-year term. Their lender offers a renewal rate, but they also have $40,000 in high-interest credit card debt. Option 1: Renewal They accept the new term. Their mortgage stays the same. Their debt remains separate at high interest rates. Option 2: Refinance at Maturity They consolidate the credit card debt into the new mortgage. Their total monthly payments drop significantly, even after accounting for the new mortgage balance. In this situation, refinancing provides better cash flow and a simpler payment structure. Quick Summary Mortgage Renewal: Starts a new term for your existing mortgage Mortgage charge on your title stays the same Keeps all other terms the same aside from interest rate Can switch lenders at renewal through a transfer No penalty when done at maturity Mortgage Refinance: Pays off current mortgage and creates a new one New mortgage charge registered on your title Often resets the amortization period Can access equity or make structural changes Maximum 80% of property value for uninsured mortgages Incurs penalty if done before maturity Next Steps Understanding the difference between renewal and refinance helps you make informed decisions about managing your mortgage. If you have a renewal coming up or are considering accessing your home equity, now is a good time to explore your options. Whether you're looking to renew, refinance, or switch lenders, I'm here to help you navigate the process and find the best solution for your situation. Need help with your mortgage? Book a consultation or call 778-988-8409 . Glossary Amortization: The total time period over which you'll pay off your mortgage, typically 25-30 years in Canada. Insured Mortgage: A mortgage where the down payment was less than 20%, requiring mortgage default insurance to be added. Maturity Date: The end date of your current mortgage term, when you need to renew or refinance. Mortgage Charge: The legal registration of your mortgage on your property's title. Pre-payment Penalty: A fee charged by your lender if you pay off your mortgage before the end of your term. Refinance: Replacing your existing mortgage with a new mortgage, often with different terms or to access equity. Renewal: Starting a new term for your existing mortgage, typically just updating the interest rate. Term: The length of time your current mortgage contract is in effect, typically 3-5 years in Canada. Transfer: Moving your mortgage from one lender to another at renewal without changing other terms.