How does credit rating work in Canada?

Question

I would like to understand how to model to evaluate if credit score is different in Canada from the USA.

I just finished paying some debt on a 0% credit card and I have no more use of this card (and another one). Both the card are my newest. Closing those two card would kill more than half my limit in cc but I don't really care since I use use 100-400 per month on a limit that would be around 5500$.

I have frequently heard people telling that having high limit in credit card is a liability (even if you don't use it) when you come to apply for a loan (mortgage, auto loan, etc.). Is it true that having a limit in cc can reduce your chance of securing a mortgage in Canada?

Answer 1

According to the Equifax Canada:

Here are the top, most common negative score factors. Note that the specific wording given by your lender may be different:

• Serious delinquency
• Serious delinquency, and public record or collection field
• Time since delinquency is too recent or unknown
• Level of delinquency on accounts is too high
• Number of accounts with delinquency is too high
• Amount owed too high on accounts
• Ratio of balances to credit limits on revolving accounts is too high
• Length of time accounts has been established is too short
• Too many accounts with balances

According to the Canadian Financial Consumer Agency:

Don't go over your credit limit. Use only a percentage of your available credit. Try to use less than 35% of your available credit.

Therefore, it is not necessarily having a limit on a credit card (everyone has a "limit" in terms of credit lines), it is more important that you manage that limit and don't overuse your credit. However, each bank does have a different process in viewing your application. Your realtor should have contact with various lenders that can answer specifics.