How to Secure a Mortgage Even with a Bad Credit Score?

While a healthy credit score serves as a passport to several financial benefits, poor spending habits can deprive you of the same. Notably, a poor credit score might be a barrier to obtaining a property mortgage.

However, many Canadians are currently financially unstable, given the pandemic, job loss, poor health conditions, or other factors. But the good news is it’s still possible for you to secure a mortgage with a bad credit score.

This article will explain how you can obtain a mortgage with a bad credit score. Read more about what Canadian lenders want your credit score to be to qualify you for a mortgage.

How Good Should Your Credit History Be?

Your credit score directly reflects your money management and spending habits. The duration of your credit history, payment records, and current debts go a long way in determining your credit score. A credit score is expressed in terms of numbers between 300 and 900.

You can obtain loans at lower interest rates with a healthy credit score. A higher credit score implies that you are financially responsible, and it’s safe to lend money to you. A score below 599 is considered poor in Canada, whereas a credit score between 600 and 679 is considered good. However, try to keep your credit score in excess of 680, which lenders consider excellent.

Simply put, to secure a home mortgage in Canada, your credit score should be more than 650. In case your credit score does not look impressive, there are ways to work around it.

Ways To Secure A Mortgage With A Bad Credit Score

The top-of-the-line creditors would not want to lend money to financially irresponsible people. The lenders would like to work with Canadians who are more likely to pay back the money, and that too, on time. This is why it becomes challenging to obtain a mortgage with a poor credit score. If you have a credit score lower than 650, you need to explore alternate paths to get your hands on a mortgage.

Here are some methods that can help you secure a property loan:

1. Pay A Larger Down Payment

Paying a lump sum as a down payment might not be the easiest way out. However, this happens to be your only option if you have a bad credit score. Try to pay at least 20% of the property value as a down payment. This would significantly lower the risk for the lender and increase your chances of securing a mortgage.

Moreover, you need to get the mortgage insured, which would further reduce the risk of the creditors. Canadians with a credit score of between 600 and 650 may have to get mortgage insurance, besides paying a large down payment. To give you an idea, average mortgage insurance in Canada costs between 2.8 to 4 percent of the overall mortgage amount.

2. Reach Out To Private Lenders

Although leading lenders would be reluctant to process your mortgage, some private lenders including reverse mortgage providers might want to get on board with you. Consider these alternate creditors if your credit score is between 500 and 600.

A big positive of going with private lenders is that they are more lenient than credit unions or the big Canadian banks. The catch is that you will have to pay high rates of interest.

Indeed, these lenders have minimal requirements for credit score, but they compensate themselves for this risk by charging a higher interest rate, sometimes as high as 12%. Moreover, private lenders might charge higher processing fees and other charges you need not shell out while dealing with public lenders.

3. Have a Co-Signer Or Guarantor

Having a co-signer or guarantor by your side can help you get a mortgage even with a poor credit history since it reduces the risk of mortgage default on the lender’s part.

The co-signer’s name would appear on the title besides the buyer’s. The person would sign all the documents of the mortgage deal. They would essentially co-own the property along with the actual owner and would be liable to make mortgage payments. And if the actual owner defaults, the co-signer would be responsible for paying the due amount.

On the other hand, a guarantor would ensure that the owner makes timely payments for the mortgage. If any amount remains unpaid, he or she, i.e. the guarantor, would be asked to clear the payment. However, a guarantor’s name would not appear on the property title, and they won’t have any property ownership.

4. Reach Out To A Mortgage Broker

It’d be wise to reach out to a reputed mortgage broker. These professionals have solid networks and can negotiate with private lenders and other creditors to fetch you a decent deal even if your credit report isn’t lustrous.

Although you will have to pay a minimal amount to your mortgage broker, you can save significantly on the interest rates in the long run.

Not to mention, they can also guide you on improving your credit score e.g. Credit Sesame Reviews. For instance, they may advise you to keep your oldest credit account while minimizing your debts to 30% of the overall limit.

Moreover, you may also consolidate several credit accounts into one to improve your credit score. Paying off large debts will help too!


Approaching subprime lenders happen to be the only option for individuals with poor credit scores, but you can always become more financially responsible and steadily increase your credit score. But that is for tomorrow; how do you get a mortgage today?

Things like paying a larger down payment, bringing along a co-signer or guarantor, and seeking the expertise of a mortgage broker are all potent ways to resolve the aforementioned problem.

Home Base Project Team
Home Base Project Team
At The Home Base Project, we offer practical, real-life tips and inspiration about DIY, decorating and gardening. The Home Base Project provide the best information about home renovation and design, connecting home design enthusiasts and home professionals across the world.