Credit and Mortgage Qualification

Credit Self Assessment

In this section, we quickly review what things lenders are looking for to approve your credit, and things that might create problems. If you want to keep score, grab a piece of paper and a pencil and note the number of Probably OKs and how many Potential Problems. After this section, there are More Resources which you can explore further.

To perform the following self-review for Credit, note how many Probably OKs and how many Potential Problems

Your credit is probably OK for a mortgage if...

• You pay your bills, credit cards, and loans on time, and no worse than 30 days late on rare occasion.
• You have had credit extended to you from at least two different companies (2 credit cards, or a credit card and a car loan, for example) for at least two years.
• Your balances relative to limits are modest (not maxed).
• You are new to Canada (or a young adult) and can prove you have paid your bills on time for the last 12 months via reference letters from landlord, utility companies, insurance, cell phone, bank reference letter, etc., even if you don’t have much credit established on your credit report.
• You had a bankruptcy or consumer proposal that was discharged over two years ago, and you have taken steps to re-establish your credit for at least 12 to 24 months since the discharge and there have been no further credit hiccups / late payments.
• The bad stuff (from when you were young and foolish!) happened more than 6 years ago, as it will no longer show up on your credit report (in most cases).
• Your credit score is above 650
• Your credit score is above 600 and you have a good co-signor.
• You have 25% or more down payment / equity, regardless of credit score.

# Probably OKs?______

There might be a problem with your credit if...

• You have active collections or written-off accounts, including cell phone company disputes. 
• You have unpaid judgments against you.
• You have unpaid collections, or recently paid collections (within last 3 to 6 months).
• You have any late payments in excess of 60 days in the last two years, without a really good reason.
• You don’t have any active credit in your name and had past credit difficulties.
• You pay cash for everything.
• You have applied for credit everywhere you can.
• You are close to or over your credit limits.
• You have multiple credit cards / credit lines and loans all with high balances.
• You have been in Canada for more than 5 years without establishing credit.
• You had a bankruptcy that is not yet discharged or discharged within the last 2 years.
• You had a consumer proposal that is not yet discharged or discharged within last 1 year.
• You had a foreclosure or a 2nd bankruptcy.
• You haven’t (re-)established a credit rating with at least two forms of active credit for 24 months.
• You paid your collections and bad accounts, but they are yet to show as paid in full or settled with zero balances on your credit report (happens all the time).*
• You recently paid collections just because you want to get a mortgage.
• Your credit score is under 630 and you don’t have 10% down payment.
• Your credit score is under 600 and you don’t have at least 25% down payment.

# Potential Problems?______

To qualify for a mortgage today you should have2 or more OKs, and no potential problems.

It is important to know that there are many mortgage lenders and each lender publishes specific guidelines as to what credit score or history is acceptable to them. Some even cater to credit-challenged borrowers with 20% down payment or equity. While one lender might say no, another might say okay. A mortgage broker can help identify and short-list which lenders are more favourable than others for your situation.