When you are able to secure a new mortgage even though you have bad credit and are able to consolidate some or all of your outstanding short term credit (credit cards, lines of credit, demand loans) in the process, you will likely see a positive jump in your credit score.
While there are a whole bunch of things that impact your credit score, the three most common items are 1) late payments, 2) frequent inquiries, and 3) high utilization of existing credit.
Late payments and inquiries will stay on your credit report for years. But by paying down your unsecured or on demand credit facilities, the change on your credit score is quite fast, increasing your credit score in the process.
How fast? Typically a pay down of short term credit, without impacting the total amount available, can see a positive change to your credit score in 30 to 60 days.
The amount of the change to the score will vary considerably from one person to the next and will be related to the amount of the pay down in terms of total dollars and per cent of available credit.
While every situation is unique, its not unheard of for these pay downs to net the creditor a credit score gain of 50 points or more. This can push you from the ranks of bad credit to good credit, depending on your starting point.
Once this credit score gain has been realized, keeping it there is up to you and your ongoing credit practices. This may also allow you to apply for additional credit or lower cost credit.
One major benefit would be if you used a short term private mortgage to consolidate your debt. This mortgage will likely need to be repaid in one years time, so if the consolidation process gets your credit high enough to be considered by a bank or institutional lender, you have effectively used the private mortgage to put yourself in a position to qualify for a longer term, cheaper mortgage financing solution.
If you’re in need of a bad credit mortgage for real estate purchase, mortgage refinancing, or debt consolidation, give me a call so I can quickly assess your situation and provide bad credit mortgage financing options for your consideration.
I'm a Toronto Mortgage Broker that arranges mortgage solutions on residential and commercial real estate property. With over 30 years of mortgage financing experience, I'm able to quickly assess your financing requirements and provide relevant solutions for your immediate consideration. Joe Walsh Google+ YouTube Channel