Interest rates may not have changed in July, as the Bank of Canada opted for another rate hold, but for many Canadians, high borrowing costs are still hitting hard. One growing trend we’re seeing is more people carrying credit card balances for longer.
If that’s you, you’re definitely not alone. But what many people don’t realize is that those balances could be quietly working against you when it comes time to get approved for your next mortgage.
Even if you’re making your payments on time, high balances can drag your credit score down. That can mean a higher rate, fewer options, or even a declined application.
What lenders are really watching
Lenders look closely at credit scores, and one of the biggest things that can hurt yours is credit utilization (how much of your available credit you’re using).
If your balance is regularly above 50% of your limit, your score could take a hit, even if you’ve never missed a payment. Why? Because credit bureaus take a snapshot of your balance at a specific time. If it’s high that day, it can make it look like you’re stretched thin, even if you paid it off right after. And that can raise red flags for lenders.
Minimum payments, maximum credit health
Paying the minimum might keep your account in good standing, but it won’t do much to improve your credit score or reduce your debt. With some credit cards charging 20% interest or more, that balance can grow fast, and your score won’t get the boost it needs.
As credit expert Richard Moxley puts it: “If the balance is caught at over 50% of the limit, it will dramatically lower your score.” In fact, he warns that just one maxed-out credit card can drop your score by 30 points or more. That kind of drop can seriously affect what lenders are willing to offer—or if they’ll approve you at all.
Use your mortgage to take back control
Here’s the good news: if you’re a homeowner with some equity built up, you may have options. Refinancing your mortgage to consolidate high-interest debt can:
- lower your monthly payments
- free up cash flow
- improve your credit score within a few months
It’s not the right move for everyone, but for the right situation, it can be a game-changer.
Ready for a credit check-up?
If you’re not sure where you stand or just want to make sure your credit isn’t getting in the way of your next big move, let’s chat. I can help you understand your options and see what strategy fits you best.
Whenever you’re ready, I’m here to help.