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What is Considered Bad Credit?

One step in the process of getting approved for a mortgage is a review of your credit rating. (or Credit Score or Beacon Score).  But what is a Credit rating and what does it mean?   Credit scores are a way for financial institutions to measure a consumer’s ability and reliability in paying back money they have borrowed. A person’s credit rating is a key indicator in assessing the level of risk attached to lending to a consumer.  Credit Ratings range from score of 300 to 900.  A higher credit score indicates a low risk and a lower the credit score the higher the risk.  If your credit score is below 600, locating a lender can be more challenging as lenders, including banks and credit unions and private lenders always look for assurances that the money they have lent with get repaid. Naturally the higher the risk the lesser chance they will get repaid and therefore it is common that a borrower with a lower credit rating (or Bad Credit Rating) will need pay a higher interest rate for a mortgage vs someone who has a very high credit score.

Most consumers are not familiar with their credit rating and have little knowledge as to how it is calculated and what makes it go up or down.

Bad credit mortgages are available in Canada.  Commonly banks and many large lending companies will not lend to people who have bad credit and, in these cases, working with a mortgage broker is highly recommended.  Mortgage brokers have access to many lenders who are willing to work with people with bad credit ratings.  These types of lenders are typically referred to as “alternative lenders” and include private lenders and credit unions.  


What causes a credit rating to go down?

  • Unpaid payday loans

  • Credit card and other debt problems

  • Consumer proposal & bankruptcies (past and present)

  • Unpaid taxes

  • Not making payments on instalment loans or unsecured loans

  • property tax arrears

  • past mortgage issues

Bad credit mortgage in Milton

How Can I Improve My Credit Rating?

  • Reduce your overall debt

  • Consolidate debts

  • Pay off your credit cards monthly Or at least make the minimum payment/

  • Do not miss paying off bills

  • Pay off student loans

  • If you don’t have a credit card, get one and make payments on it.

  • Get a mortgage and consistently make the payments

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