Credit Challenges
A lower credit score or past credit issues don't automatically mean you can't get a mortgage. The lender will want to understand what happened, how recent it was, and what your credit looks like now.
There may be an option available now, or it may make more sense to strengthen the application first. The goal is to know where you stand before assuming the answer is no.
Looking Beyond the Score
Credit challenges can come from missed payments, high balances, collections, a consumer proposal, bankruptcy, or simply a difficult financial period.
Two borrowers with similar scores can still have very different mortgage options because the details behind the credit history matter.
A lender may look at:
How recent the credit issue was
Whether it has been resolved
How payments have been managed since
Current income and debts
Down payment or available equity
Mortgage Options
If your credit doesn't fit one lender's guidelines, that doesn't necessarily mean you're out of options.
Traditional Lending
Banks, credit unions and other prime lenders generally have more standardized qualification guidelines. An older credit issue that has been resolved may not automatically rule this option out if the rest of the application is strong.
Credit is only one part of the decision. Income, debts, down payment and recent payment history still matter.
Alternative Lending
Alternative lenders — often called B lenders — can consider applications that don’t fit neatly within A-lender guidelines. This can include lower credit scores, past credit problems, higher debt-service ratios, or other parts of the file that need more flexibility.
Rates are generally higher than A-lender rates, and B lender mortgages include a lender fee. For a purchase, you’ll generally need at least 20% down. For a refinance, you’ll generally need at least 20% equity, although some files may require more.
Equity-Focused Lending
When the application doesn’t fit traditional or alternative institutional lending, a private mortgage may sometimes be considered. Private lenders generally place more emphasis on the property and available equity.
Private financing is usually more expensive, so there should be a clear reason for using it and a realistic plan for what happens next.
If A lending doesn't fit, I'd normally want to see whether there's a workable B-lender option before moving to private financing. Sometimes improving the file first is the better choice again.
Credit Situations
Different credit challenges can affect an application in different ways. How recent the issue is, how serious it was, and what has happened since can all make a difference.
Recent or repeated missed payments usually matter more than an older isolated issue that has since been resolved.
Balances close to your limits can affect both your credit profile and your debt-service ratios.
The amount, age, type of debt, and whether the collection has been resolved can all affect the lender’s decision.
The available options can depend on whether the proposal is active or completed and how credit has been managed since.
The discharge date, reason for the bankruptcy, and re-established credit can all affect lender choice and timing.
A thin credit file isn’t the same as bruised credit, but limited repayment history can still make qualification more complicated.
Past Insolvency
Both can affect lender choice and timing, but neither automatically means a mortgage is off the table.
Consumer Proposal
Whether the proposal is active or completed
How long it has been since completion
Whether credit has been re-established
Recent payment history
Income, down payment, or available equity
Bankruptcy
The discharge date
Whether it was a first or subsequent bankruptcy
What caused the financial difficulty
Whether credit has been re-established
The strength of the application today
The dates, current credit history, down payment or equity, and lender being considered all matter. I'd want to review those details before deciding which route makes sense.
Timing and Strategy
A B mortgage can be a useful bridge, but sometimes improving the application first leads to a better financial outcome.
Moving Ahead
The application fits a B lender today
There’s enough down payment or equity
The reason for borrowing now outweighs the higher cost
There’s a realistic plan for improving the file
Waiting
Balances can be reduced relatively soon
Recent credit issues need more clean payment history
A better lender tier may be within reach
Waiting could materially reduce the cost of borrowing
If a B mortgage is the right route today, I'd also want to know what needs to change before the next renewal so we can revisit lower-cost options later.
Example Scenario
The Situation
A buyer has stable employment and more than 20% down, but a difficult financial period within the last couple of years has left their credit outside A-lender guidelines.
A Possible Route
Stable income
More than 20% down
Improving recent payment history
A plan to revisit A lending at renewal
The point isn't just to get approved. It's to have a realistic plan for what comes next.
This is a general example only. Actual mortgage options depend on the full application.
Common Questions
There isn’t one score that guarantees approval or automatically rules you out. Lenders also look at payment history, debts, income, down payment or equity, and the circumstances behind any past credit issues.
Possibly. Depending on the full application, an A lender, B lender, or private lender may be available. In other cases, improving the credit profile first may lead to a better option.
Yes, B lenders can be more flexible than A lenders, but approval still depends on the full application. Credit history, income, debts, property, down payment or equity, and the reason for the credit issues can all matter.
It depends on the lender route. If you still qualify with an insured or traditional lender, normal minimum down payment rules may apply. B lending generally requires at least 20% down, and some files may require more.
There may be options. Whether the proposal is active or completed, the timing, re-established credit, and the strength of the current application can all matter.
A past bankruptcy doesn’t automatically prevent you from getting another mortgage. The discharge date, credit history since then, and the rest of the application will affect the available options.
Possibly. A refinance may be available through A, B, or private lending depending on your credit history, income, debts, property value, and available equity.
Not necessarily. I’d normally want to look at A and B lending options before assuming private financing is required.
Keep Going
Credit is only one part of a mortgage application. These resources can help you look at some of the other numbers and options that may matter.
Mortgage Guide
See how equity, income, debts, and lender choice can affect your options if you are considering refinancing.
Mortgage Tool
See how much down payment may be needed and how the numbers change at different purchase prices.
Mortgage Scenarios
Browse other real-world situations involving income, timing, property, refinancing, and mortgage qualification.
Not Sure Where You Fit?
Your approximate credit score, income, down payment or equity, and a little context about what affected your credit are enough to start.