If your credit score isn’t where you want it to be, buying a home can feel out of reach. Many buyers assume bad credit means an automatic “no” from lenders — but that’s not always the case. In Canada, there are ways to get a mortgage with less-than-perfect credit. It may take more planning and flexibility, but homeownership is still possible.
The first step is understanding how lenders look at your situation and what options are available.
Your Credit Score Matters — But It’s Not the Whole Story
Credit scores play a role in mortgage approval, but they’re only one piece of the puzzle. Lenders also look at:
- Your income and job stability
- How much existing debt you carry
- Your down payment
- Your overall financial habits
Someone with a lower credit score but steady income and manageable debt can sometimes be a stronger applicant than someone with higher credit and unstable finances.
Working with a Mortgage Broker Can Make a Big Difference
If your credit isn’t great, a mortgage broker is often your best starting point. Unlike banks, brokers work with multiple lenders — including those who are more flexible with credit history.
A good broker can:
- Match you with lenders open to credit challenges
- Explain your options clearly
- Help you avoid applying where you’re unlikely to be approved
This can save time, stress, and unnecessary hits to your credit.
Alternative and Private Lenders Are an Option
Canada has more than just the big banks. Buyers with poor credit sometimes qualify through:
- Alternative (B) lenders, who focus more on income and equity. Alternative (B) lenders are mortgage lenders that sit between the big banks and private lenders. They’re still legitimate, regulated institutions, but they use more flexible approval guidelines. Instead of focusing only on credit score, B lenders look at the full picture — income, employment stability, down payment, and the value of the home.
These lenders are often used as a temporary solution. While interest rates are usually higher than at major banks, many buyers use a B lender to purchase now, improve their credit over time, and refinance with a traditional lender later.
- Private lenders, who are primarily concerned with the property value and down payment
- Credit unions, which can be more flexible depending on the situation
These options usually come with higher interest rates and fees, but many buyers use them as a short-term solution. Once credit improves, refinancing with a traditional lender may become possible.
A Larger Down Payment Helps
When credit is weak, a larger down payment can work in your favour. Putting more money down reduces the lender’s risk and can improve your chances of approval.
In many cases, buyers with bad credit should plan for 20% or more, especially if using alternative financing. It’s not always required — but it often opens more doors.
Using a Co-Signer
A co-signer with strong credit can help strengthen your mortgage application. This is often a parent or close family member. Their income and credit are considered alongside yours, giving lenders more confidence.
That said, co-signing is a serious commitment. Missed payments affect both parties, so it’s important to be honest and realistic before going this route.
Improving Credit Before You Buy
If your timeline allows, taking time to improve your credit can expand your options and lower your long-term costs. Even small improvements can help.
Focus on:
- Paying all bills on time
- Reducing credit card balances
- Avoiding new credit applications
- Checking your credit report for errors
A better credit score doesn’t just help with approval — it can save you thousands in interest over the life of your mortgage.
Other Paths to Homeownership
For some buyers, a traditional mortgage isn’t the right first step. Options like rent-to-own or buying with a future refinance plan can provide a way forward while credit improves.
These situations require careful consideration and professional advice, but they can act as a bridge instead of a roadblock. With the right guidance and realistic expectations, many buyers successfully move forward despite credit challenges.
If you’re unsure where you stand, start with a conversation — a mortgage professional can help you understand your options before you ever begin house hunting.
