Can You Get a Mortgage With Bad Credit in Ontario?

Getting turned down by a bank doesn’t close the book on homeownership. The score is just one piece of what lenders look at, and for files the banks turn down, there are other lenders who take a different approach.

What Is Considered Bad Credit in Canada?

In Canada, Equifax and TransUnion each generate a credit score for you. Here’s how scores are generally categorized:

• 760+ – Excellent
• 680-759 – Good
• 620-679 – Fair
• Below 620 – Poor

Plenty of things can land you below 620 that have nothing to do with serious financial trouble. Something to keep in mind: when a lender pulls your file for a mortgage application, it’s a hard credit check that can temporarily knock a few points off your credit score. Checking your own report is a soft check with no impact.

Can You Still Get Approved for a Mortgage With Bad Credit?

Yes, but your options may differ. What else you bring to the table matters. Putting more down, showing steady income, keeping your debt manageable, and having a strong co-signer can all work in your favour.

Mortgage Options for Bad Credit Borrowers in Ontario

Traditional banks want a score of around 650 or higher, consistent employment, and debt ratios that fall within their guidelines.

Alternative lenders like trust companies and certain credit unions exist for exactly the files banks decline. Missed payments, lower scores, self-employment income, consumer proposals: all of these situations are workable. The rate will be slightly higher than at a bank, but the typical approach is to use an Alternative lender for short-term financing, improve the credit file, and move to a traditional bank at renewal.

Private lenders look at the property value, not your credit history. They’re the most expensive option on the table and make sense only when other lenders have all said no.

What Credit Score Do You Need for a Mortgage in Ontario?

No two lenders draw the line in exactly the same place, so use this as a rough guide:

• 680+ – Best rates with banks
• 620-678 – Many traditional options still available
• 550-619 – Alternative or B lenders only
• Below 550 – Private lenders may be needed

Why Mortgage Applications Get Denied

Missed payments, collections, a consumer proposal, bankruptcy, thin income, high debt ratios, unstable employment… Any of these can get your application rejected. However, remember that one “no” from a bank is not a final answer: Other lenders may still be an option.

How to Improve Your Chances of Mortgage Approval

• Save a larger down payment. A 20% down payment removes default insurance and gives lenders more confidence.
• Pay down debt. Cards near their limit drag your utilization ratio and score.
• Hold off on new credit. Hard inquiries add up and raise questions.
• Keep payments consistent. Payment history influences your score more than anything else.
• Use a mortgage broker. Mortgage brokers like The Mortgage Advisors know which lenders will look at your file and can advise you on the best mortgage strategy in your situation.

How Much More Will You Pay With Bad Credit?

The cost goes up with bad credit: higher rates, built-in lender fees, and broker fee. The monthly gap between a B lender’s rate and a bank’s rate can be significant. Most borrowers treat this as a bridge: get in, clean up the file, and refinance.

Steps to Take Before Applying

1. Get your credit report from Equifax or TransUnion and challenge anything that’s inaccurate.
2. Reduce balances on cards that are close to their limit.
3. Gather income documents, including pay stubs, tax returns, NOAs.
4. Avoid new credit and large purchases before applying.
5. Speak with a broker before applying anywhere.

Final Thoughts

Bad credit narrows your options, but it doesn’t end them. Lenders exist specifically for these situations, and a broker who works in this space knows exactly where to take your file. Have that conversation before you start applying anywhere: contact The Mortgage Advisors to find out what’s possible for your situation.

Frequently Asked Questions

Can I get a mortgage with a 500 credit score?

Possibly, through an alternative or private lender. The down payment and the property’s value matter more to that score than the number itself.

Can I buy with collections on my report?

Possibly. B or alternative lenders weigh how old the collections are and what amount is involved.

How long after bankruptcy can I get a mortgage?

Two years post-discharge with two new trades re-established for two years is the typical minimum for traditional and bank lenders for a purchase. Alternative or B lenders often lend right away, as long as the bankruptcy has been discharged and there is at least a 20% down payment or equity; this also depends on the property’s location. Private lenders would also require bankruptcy to be discharged.

Do bad credit mortgages cost more?

Yes, but most borrowers refinance once their credit improves. It is a short-term solution that needs a clear exit strategy. 

Can self-employed borrowers with bad credit get approved?

Yes. Alternative or B lenders that work with stated or alternative income can be the right fit.