Get a mortgage while your credit recovers, and a plan to stop paying for it

Bruised credit does not mean no mortgage. It usually means a shorter list of lenders, a higher rate for a while, and a plan to get you off that list. What it should never mean is renewing outside prime year after year because nobody put a timeline on it. I compare 50+ lenders, including the alternative lenders that read a file rather than only a score.

What lenders are actually reading

The score is a summary, not the story. Two files with the same number get very different answers depending on what sits behind it.

What moves a decision, beyond the number: how recent the damage is, whether it has stopped, whether there is an explanation a lender can follow, how much you are putting down, and how stable your income looks now. A missed run of payments during a job loss two years ago, with everything clean since, reads as history. The same pattern still running today reads as risk.

Credit scores in Canada run from 300 to 900, and there are two bureaus, Equifax and TransUnion. Lenders do not all pull the same one, and the two do not always agree, which is one reason a decline at a single bank is not the verdict people take it for.

The one published line: 600

Most of what you read about credit scores and mortgages is somebody’s rule of thumb. There is one number that is not.

CMHC requires at least one borrower or guarantor to have a credit score of 600 or higher for an insured mortgage, alongside maximum debt service ratios of 39 percent gross and 44 percent total. That threshold is the practical divide in Canadian lending:

• At or above 600, with the rest of the file in order, insured financing with as little as 5 percent down is available.
• Below 600, the file is uninsurable, which means at least 20 percent down and an alternative lender.

Individual lenders set their own bars on top of that, and prime lenders generally want the high 600s or better for the widest choice and best pricing. But 600 is the line the system is actually built around, and knowing which side of it you are on changes the entire plan.

How long the damage actually lasts

This is the part almost nobody knows, and it is often the difference between applying now and applying in four months.

What is on the report	How long it stays
Late or unpaid credit cards and loans	6 years
Accounts sent to collection	6 years
First bankruptcy	Generally 6 years after discharge
Subsequent bankruptcies	14 years
Consumer proposal	3 years after full payment, or 6 years from signing, whichever comes first
Credit counselling or a debt management plan	2 years after you finish repaying
Judgments	6 years
Hard enquiries	3 years at Equifax, 6 years at TransUnion

Alberta uses the standard periods. A handful of other provinces have longer ones for bankruptcies and judgments at TransUnion, which is why advice you read from Ontario sometimes does not match your report.

Pull your own report before you do anything else, from both bureaus. It is free, and checking it yourself is a soft enquiry with no effect on your score. Then find the dates. If the worst item on your file is 68 months old, the calendar is about to do more for you than any strategy I could suggest.

The three tiers, and what each one is for

	Prime, or A	Alternative, or B	Private
Who lends	Banks, credit unions, monoline lenders	Trust companies and specialist lenders, all regulated	Mortgage investment corporations and individuals
Typical use	Score 600+, documented income	Bruised credit, unusual income, a recent event	Short-term, equity-driven, a problem to solve
Down payment	From 5%	20% minimum, with no exceptions	Usually 25% or more
Fees	Rarely	A 1% lender fee is the norm; lenders that skip it price the rate higher instead	Lender and broker fees, plus legal
Term	1 to 5 years	1 to 2 years, by design	6 to 24 months
The point	The destination	A bridge with a date on it	A tool for a specific problem

Alternative lenders are not a last resort and not a punishment. They are regulated institutions used constantly in ordinary circumstances, and most alternative mortgages are written on short terms precisely because they are meant to end. Private lending is the third tier and a different conversation again.

What it costs, in dollars rather than percentages

A higher rate is easy to nod along to and hard to feel until it is a number. Take a $400,000 mortgage over a 25-year amortization, with two illustrative rates two points apart, and hold it for a two-year term.

Over a two-year term	Prime at 4.49%	Alternative at 6.49%
Monthly payment	$2,212	$2,677
Interest paid over two years	$34,822	$50,401
Balance remaining	$381,742	$386,156
Lender fee at 1%	none	about $4,000

The gap is roughly $465 a month and $15,600 of interest over two years, plus the fee, plus about $4,400 less principal paid off.

Read that as the price of a bridge, not as a verdict. Twenty thousand dollars over two years to own the house you want, in a market you expect to keep moving, while you repair a file that then gets you prime pricing for the following twenty years, can be an entirely rational trade. The same twenty thousand, repeated four times because nobody ever revisited it, is not.

That distinction is the whole service.

The plan back to prime

The useful version of this page is not the approval. It is the approval plus the exit.

Three things move a score faster than anything else:

1. Get revolving balances below about 30 percent of their limits. Utilisation is the fastest-moving input there is, and it updates monthly. Paying a card from 90 percent down to 25 percent can move a score in a single cycle.
2. Never miss another payment. Payment history carries the most weight, and a clean run is what a lender is looking for behind the number.
3. Leave your oldest accounts open. Closing a card you have had for twelve years shortens your history and shrinks your available credit at the same time, which usually pushes the score down rather than up.

Time does the rest, because older items lose weight whether or not you do anything.

That is why a one or two year alternative term is the usual shape. It buys the room to buy the house and the runway to repair the file, with a scheduled conversation at the end rather than an automatic renewal. I will tell you what the target is, what the file needs to look like, and roughly when you should be able to move. Then I will be there at that point, because renewals are part of the relationship rather than a transaction that goes quiet.

Mistakes that make it harder

• Applying at five banks in a fortnight. Each is a hard enquiry. Mortgage enquiries in a short window are generally treated as one shopping event, but scattered applications across different products are not. Working through me means one credit pull for the whole search.
• Closing cards to tidy up. It reduces your available credit and your history at once.
• Opening a new loan just before applying. A financed vehicle in the month before a mortgage application has ended more files than bad credit has.
• Ignoring a small collection. A $180 telecom bill in collections can matter more to a lender than the amount suggests, because it is recent and unresolved rather than large.
• Assuming a decline is the answer. It is one lender’s answer, on one bureau’s number, against one policy manual.

What an alternative lender looks at instead

When the score stops being the deciding input, four other things take its place. Knowing which of them you are strong on tells you a great deal about your odds before anyone pulls anything.

Equity. This is the big one. An alternative lender is protected by the gap between what you owe and what the property is worth, so the down payment does more work than it does at a bank. Twenty percent is a floor rather than a preference: no alternative lender will go below it, whatever the rest of the file looks like. Twenty-five or thirty widens the list considerably and improves the pricing.

Expect a fee, too. Most alternative lenders charge about 1 percent, and the ones that advertise no fee price the rate higher to make up for it, so offers have to be compared on the total cost of the term rather than on either number alone.

The property. Alternative lenders think about what a property would sell for if it had to. A conventional house in Calgary, Airdrie or Red Deer is easy. An acreage with a large shop, a home with a non-conforming suite, or a house in a small town with few recent sales is harder, and sometimes the property rather than the credit is what narrows the list.

How you have paid your housing. A perfect mortgage or rent payment record alongside damaged consumer credit is a much better story than the reverse. Bring proof of it. Twelve months of bank statements showing the payment going out on time is real evidence and it is often decisive.

Whether there is an exit. A lender writing a two-year term wants to see what happens at the end of it. A file with a visible path back to prime, dates and all, is a more attractive file than one with no plan, and it is one of the reasons I write the exit into the application rather than leaving it implied.

After a bankruptcy or a consumer proposal

The event matters less than the sequence that follows it, and the sequence is where people lose years without meaning to.

Lenders generally want three things: the discharge or completion paperwork, some re-established credit afterwards, and a clean stretch of history. How much of each varies widely between lenders, which makes this one of the clearest cases where the choice of lender, rather than the rate sheet, decides whether there is an approval at all.

The re-established credit is the part people skip. Coming out of a proposal with no active credit at all leaves you with a thin file, and a thin file is its own problem regardless of the score. A secured credit card used lightly and paid in full every month, held for a year or two, does more for a mortgage application than a year of paying cash for everything.

Bring the discharge paperwork to the first conversation. Not having it is the most common reason a workable file stalls for a month.

What to do in the next 90 days

1. Pull both reports, free, and check them for errors. Disputed errors do get corrected.
2. Write down the date of the oldest damaging item and add six years.
3. Get every revolving balance under 30 percent of its limit, starting with the highest utilisation rather than the highest balance.
4. Set every minimum payment to automatic so nothing is missed while you are focused elsewhere.
5. Do not open anything new.
6. Call me with what the reports say, and we will decide whether to move now or in three months.

When the answer is to wait

Sometimes the right advice is not to buy yet, and you will get it. If a collection is about to age off, or six clean months would move you into prime, waiting can be worth more than anything I could arrange today. If rents are climbing faster than the rate difference costs you, moving now can be the better call.

It is arithmetic rather than a principle, and it is the kind of arithmetic worth doing before you fall in love with a listing.

What happens when you call

Tell me what you think is on your file, even if you are not sure. We will look at the real picture, work out whether prime is reachable now or on a horizon, and put numbers on both routes so the choice is yours rather than a lender’s.

The conversation is free, carries no obligation, and there is no credit check just to have it.

Sources: the 300 to 900 score range, the two bureaus and the fact that checking your own report does not affect your score come from the Financial Consumer Agency of Canada’s credit report and score basics. The retention periods are from FCAC’s page on what is in your credit report. The 600 minimum credit score and the 39 and 44 percent debt service maximums are CMHC’s, from its quick reference for mortgage loan insurance. Payment and interest figures are illustrative, calculated with Canadian semi-annual compounding.