The first aspect of bad credit is a low credit score and by a low score I’m referring to a FICO score issued by one of the two major credit reporting bureaus in Canada (Equifax or Trans Union) that is below 650. This is a typical cut off point for an institutional lender, but there are still variations among this group.
The credit bureaus receive monthly reporting information from participating lenders with respect to their borrower payment performance over the last month. Most of the information is for loans, lines of credit, and credit cards that are unsecured.
The information collected by the credit bureaus, along with an individuals personal profile, are used to calculate a credit score which ranges from 300 to 900. The information provided is displayed and calculated as is, so if there are any errors or omissions in the information, the credit bureau still reports the information as provided.
When you have a score below 650, you will automatically not be eligible for certain mortgage programs offering the lowest market rates. As your credit score drops even further, there will be more programs that you will either not qualify for, or will charge higher rates of interest as a result of what they view to be a bad credit or higher risk profile.
There are times that a low score is caused by an error or omission in the credit reporting and if you can verify information is recorded in error, you may be able to still take advantage of certain mortgage programs and rates that would otherwise be unavailable due strictly to the credit score.
Bad credit can further relate to the near term activity in your credit report. For instance, if you had credit problems in the past, but have worked hard to rebuild your credit and are just short of the required level of credit of a given lender, there may be opportunities to still secure excellent lending rates and terms.
However, if your credit score is low, and your near term credit performance shows some combination of late payments and delinquent accounts, then your bad credit is going to force you into higher risk mortgage lenders which can include private money lending sources that are less concerned with your credit profile and more concerned with the quality and value of the real estate security.
That being said, even private lenders can steer away from bad credit mortgage scenarios where the borrower is always late or in default as this can indicate future payment problems that they would prefer to avoid.
If you think you have bad credit, I recommend that you give me a call so that I can quickly provide you with your options for bad credit mortgage financing.
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