Bad credit doesn't mean no mortgage — it means a different path to get there.
A low credit score makes getting a mortgage harder — but not impossible. Canada has a tiered lending system with options for borrowers at every credit level, from pristine 800+ scores to applicants who've been through bankruptcy. Here's how it works.
What Credit Score Do You Need for a Mortgage in Canada?
Credit Score
Mortgage Options
Typical Rate Premium
720+
All A lenders; best rates
None (prime rate)
680–719
Most A lenders
0–0.25%
640–679
Some A lenders, most B lenders
0.25–0.75%
600–639
B lenders, some private
0.75–2%
Below 600
Private lenders primarily
3–6%+
Discharged bankruptcy
B or private; 2 yrs post-discharge
1.5–4%+
A Lenders vs. B Lenders vs. Private Lenders
Canada's mortgage market has three tiers:
A lenders: Big banks, credit unions, monoline lenders. Best rates. Require 640–680+ scores and full income verification.
B lenders: Trust companies, Schedule B/C banks (Equitable Bank, Home Trust, CMLS). Accept 580+ scores with compensating factors. Rates 1–2% above prime.
Private lenders: Individuals or mortgage investment corporations (MICs). No minimum credit score; asset-based lending. Rates 4–10%+ above prime. Short terms (1–2 years).
What Causes a Low Credit Score?
Missed or late payments on credit cards, loans, or utilities
Collections or charge-offs
High credit utilization (using more than 30–35% of available credit)
Consumer proposal or bankruptcy
Limited credit history (too few accounts, too short a history)
Too many hard inquiries in a short period
Note: CMHC-insured mortgages (less than 20% down) require a minimum credit score of 600. Below 600, you'll need 20%+ down and a B or private lender. There is no insured mortgage option for sub-600 credit scores.
B Lender Mortgage with Bad Credit
B lenders specialize in applicants who don't qualify for prime A rates. Key features:
Accept credit scores as low as 550–580 with compensating factors
Usually require minimum 20% down payment
Charge rates 1–2.5% above typical A lender rates
Often have lender fees of 0.5–1% of mortgage amount
Offer 1–2 year terms, allowing you to rebuild credit and refinance at a better rate
Private Mortgage Lenders for Bad Credit
Private lenders focus on the property's value (LTV), not your credit score. They're the option of last resort but can be a bridge strategy:
No minimum credit score
Maximum LTV typically 65–75%
Rates: 8–14% and up
Short terms: 6 months to 2 years
Significant lender and broker fees
The goal with a private mortgage is usually to buy time — 1–2 years to rebuild credit, then refinance at a B or A lender.
How to Rebuild Credit to Get a Better Mortgage
Get a secured credit card: Deposit $500–$1,000 as collateral and use it responsibly.
Pay every bill on time: Payment history is the biggest factor (35% of your score).
Keep credit utilization below 30%: Don't max out your credit cards.
Don't close old accounts: Length of credit history matters.
Dispute errors on your credit report: Check Equifax and TransUnion for inaccurate information.
Avoid new credit applications: Multiple hard inquiries hurt your score temporarily.
Timeline: Most credit issues begin to lose impact after 2–3 years of positive payment history. A discharge from bankruptcy must be 2 years old before most B lenders will consider you. Significant score improvement is possible within 12–18 months of consistent positive behavior.
Consumer Proposal and Bankruptcy
If you've been through a consumer proposal or bankruptcy, mortgage eligibility depends on when it was discharged:
Consumer proposal: Most B lenders require 2 years post-completion, with strong post-proposal credit history
Bankruptcy: Most B lenders require 2 years post-discharge with re-established credit
Private lenders may accept immediately post-discharge with 35%+ down payment
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