Does Bad Credit Always Stand in the Way of a Mortgage?

Posted in Mortgage News:

When you make a late payment or default on a loan, the lender reports this to the credit bureaus. That information becomes part of your credit report and can influence future lending decisions. If you’re applying for a mortgage and have bad credit, it can affect your ability to get approved—but it doesn’t always have to be a dealbreaker.

There are many life circumstances that can impact your credit, including:

Late Payments

Your payment history makes up 35% of your credit score, so missing payments—especially those more than 30 days late—can significantly reduce your score. If these late payments are reported to the credit bureaus, they may stay on your record for years.

Collection Accounts

When creditors are unable to collect payments, they may sell the debt to a third-party collection agency. Once in collections, the account is recorded on your credit report and remains there unless it’s resolved. Without action, this can prevent you from getting approved by most lenders.

Bankruptcy

Filing for bankruptcy—whether personal or business—has a major negative impact on your credit. In Canada, a bankruptcy can stay on your credit report for 6 to 7 years, making it more difficult to access new credit, including mortgages.

Charge-Offs

If an account becomes delinquent for too long, a creditor may charge it off, which means they no longer expect payment. This places a serious negative mark on your credit. However, the debt remains, and you still owe the balance—even though the account is closed and unusable.

Loan Defaults

Loan defaults are treated much like charge-offs. If you miss multiple payments and do not catch up by month’s end, the default is reported and added to your credit history—damaging your credit reputation and lowering your score.

If you have poor credit and want to get a mortgage to buy a home, the process can be more difficult— but not impossible. Some lenders will still consider your application, but finding them and understanding their requirements isn’t always easy.

One of the best ways to find a lender who may be open to working with you is to partner with a reputable and experienced mortgage broker. Brokers have access to a wide network of lenders— including some you may not even know about—and can help you find a mortgage option that fits your financial situation, even if your credit is less than ideal.

Call us at 403-460-7707 or reach out online to book a consultation with a broker today.