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Buying a home is one of the biggest financial steps most Canadians will take, but if your credit score is low, getting approved for a mortgage can feel impossible. Traditional lenders usually require strong credit to qualify, and anything below 600 can quickly limit your options. Many people in this situation feel discouraged, believing that homeownership is out of reach.
A low credit score doesn’t just make it harder to get approved. It can also mean higher interest rates, larger down payments, and stricter lending terms. Even borrowers with good income and stable employment may find themselves facing rejections or less favourable offers. This can make the process stressful and confusing, especially when you’re ready to buy but can’t seem to find a lender willing to help.
The reality is that buying a house is still possible, even with a low credit score. In this article, you’ll learn how to get a mortgage in Canada when your credit is less than perfect. We’ll cover how lenders assess risk, what types of mortgages are available for low-credit borrowers, and how alternative options such as rent-to-own through Requity Homes can help you move into your future home while rebuilding your credit.
Key takeaways
- Canadians with credit scores below 600 may still qualify for mortgages through B-lenders or private lenders
- A larger down payment, strong income, or a co-signer can improve approval chances
- Bad credit mortgages usually come with higher interest rates and additional fees
- Programs like rent-to-own can help you work toward homeownership while rebuilding your credit
- Improving your credit score, even slightly, may significantly reduce mortgage costs
What is considered a low credit score for a mortgage in Canada?
In Canada, credit scores typically range from 300 to 900. Here’s how lenders generally categorize scores:
- 760+ – Excellent
- 725–759 – Very good
- 660–724 – Good
- 560–659 – Fair
- 300–559 – Poor
If your credit score is under 600, most traditional lenders (called A-lenders, like major banks) will not approve you for a mortgage. However, alternative lenders (B-lenders, private lenders and rent-to-own companies) may still consider your application, depending on other factors such as income, debt levels, and down payment.
Can you get a mortgage in Canada with a low credit score?
Yes, you can get a mortgage with a low credit score, but it’s more difficult. A credit score below 600 usually disqualifies you from CMHC-insured mortgages and standard bank financing. However, other options are available.
Factors that can help offset low credit when purchasing a home:
- A larger down payment (20% or more)
- Stable, verifiable income
- Low debt-to-income ratio
- A co-signer with strong credit
- Willingness to accept higher interest rates or shorter terms
Lenders assess overall risk. Even with a bad credit score, you may be approved if the rest of your financial picture is strong.
Read more about can you get a mortgage with no credit
Mortgage options available to Canadians with low credit scores
If your credit score is below 600, getting approved by a major bank may be difficult. However, several alternative mortgage solutions exist for Canadians with low or challenged credit. These include B-lenders, private lenders, and rent-to-own programs. Each option has different approval criteria, interest rates, and long-term considerations.
Traditional mortgages (A-lenders)
A-lenders include major Canadian banks and credit unions that offer insured and uninsured mortgage products with the most competitive rates. These lenders have the strictest qualification standards, and approval usually depends on your credit score, income, debt ratios, and employment history.
Key features:
- Generally require a credit score of at least 620 to 680, depending on the lender
- May approve insured mortgages with as little as 5% down, but only if credit criteria are met
- Offer the lowest interest rates and longer amortization periods
- Require clean financial history with no recent bankruptcies or major collections
- Typically suited for borrowers with strong credit, stable employment, and consistent income
If your credit score is below 600, A-lender approval is unlikely unless you have a co-signer or significant compensating factors. In those cases, many buyers turn to alternative lending options.
B-lender mortgages
B-lenders are regulated financial institutions such as trust companies, monoline lenders, and some credit unions. They provide mortgages to Canadians who don’t meet the strict criteria of traditional banks, including those with bruised credit, inconsistent income, or a limited credit history.
Key features:
- Accept credit scores as low as 550 to 600
- Require a minimum 20% down payment, since these mortgages are uninsured
- Charge interest rates 1% to 3% higher than A-lenders
- Often include lender fees, typically around 1% of the loan amount
- Offer shorter mortgage terms, usually 1 to 3 years, with the goal of refinancing later
B-lenders are a popular stepping stone for buyers working to rebuild credit. If you make on-time payments and improve your financial profile, you may qualify for a better mortgage in the future.
Private mortgage lenders
Private lenders include individuals, investor groups, or mortgage investment corporations (MICs) that provide short-term financing for higher-risk borrowers. These lenders focus more on property and home equity than credit history, making them a fit for those with very low or no credit.
Key features:
- Approve borrowers with credit scores below 550 or limited credit history
- Typically require a 25% or higher down payment
- Interest rates often range from 7% to 14% or more
- Charge high fees, including lender and broker costs, often 1% to 3%+
- Loan terms are usually short, between 6 and 24 months
Private mortgages are best viewed as temporary solutions. They are often used when immediate financing is needed or while improving credit to qualify for better options.
Rent-to-own programs
Rent-to-own is an alternative path to homeownership for Canadians who are not yet eligible for a mortgage. You rent the home while saving toward a down payment and working to improve your credit, with the goal of purchasing the home at the end of the lease.
Key features:
- Minimum credit score requirement of 500
- Requires stable employment and a steady income source
- Minimum savings of 2% of the home’s value
- No active bankruptcies, consumer proposals, or major unpaid debts
- Monthly rent includes a savings portion to build your future down payment
- Lease terms typically last 2 to 5 years, with a pre-set purchase price
Top rent-to-own programs like Requity Homes offer rent-to-own solutions that help Canadians build credit and transition into homeownership over time. It’s a structured option for those who need time to meet mortgage approval requirements.
Read more about mortgage vs rent-to-own
Strategies to qualify for a mortgage with low credit
Getting approved for a mortgage with low credit is difficult, but not impossible. Many lenders are willing to look beyond your credit situation if other parts of your financial profile are strong. By improving your down payment, showing steady income, or working with someone who has good credit, you may still qualify.
Make a larger down payment to offset low credit
If your credit score is below 600, most lenders will require a down payment of at least 20 percent. Putting more money down reduces the risk for the lender and increases your likelihood of approval.
A higher down payment also improves your loan-to-value ratio, which can help you qualify for more competitive rates and terms. It shows lenders that you have savings discipline and are financially prepared for the responsibilities of homeownership.
If you can save more than the minimum, even better. Every extra dollar you contribute reduces the amount you need to borrow and the interest you will pay over time.
Read more about how to save for a down payment
Use a co-signer or guarantor when your credit is low
A co-signer with strong credit and income can help you qualify for a mortgage that you may not be able to get on your own. Lenders will consider both your financial profile and your co-signer’s when reviewing the mortgage application.
The co-signer becomes legally responsible for the mortgage if you cannot make the mortgage payments. Because of this, most co-signers are close family members or trusted individuals who are willing to take on that responsibility.
This approach is most helpful if your credit is low or if your income is not quite enough to meet lender requirements. Both parties should understand the long-term commitment and make sure expectations are clear from the start.
Demonstrate income stability and manage your debt
Even with poor credit, you may still qualify for a mortgage if your income is steady and your debt is low. Lenders look closely at how much of your income goes toward housing and other financial obligations.
Two key ratios are used:
- Gross Debt Service (GDS) ratio should be below 39 percent
- Total Debt Service (TDS) ratio should be below 44 percent
These ratios help lenders determine whether you can afford your monthly payments. If your income is stable and your debts are well managed, lenders may be more willing to overlook a poor credit score.
How to improve your credit score before applying for a mortgage
Improving your credit health can give you access to more lenders, better rates, and lower borrowing costs. Even a small increase of 30 to 50 points can make a noticeable difference in the mortgage offers available to you.
Here are ways to improve your credit before applying:
- Pay off or reduce your credit card balances. This lowers your credit utilization ratio, which is the percentage of available credit you're using. Ideally, keep it below 30 percent on each account and overall.
- Make timely payments and avoid late payments on bills, loans, and credit cards
- Avoid opening new credit accounts or triggering credit inquiries before applying for a mortgage
- Review your credit report for errors using Equifax or TransUnion, and understand why your credit score may be different on different sites.
- Consider using a secured credit card to build or rebuild your credit history
Most people begin seeing improvements in three to twelve months with consistent effort. If you are not in a rush to buy, investing this time can save you thousands in interest.
Costs and risks of getting a mortgage with low credit
Mortgages for low-credit borrowers often come with higher costs and more restrictive terms. Lenders charge more to offset the added risk of lending to someone with a history of missed payments or high credit usage.
Common risks and added costs of low credit mortgages include:
- Higher interest rates compared to traditional mortgages
- Lender and broker fees that can range from one to three percent
- Shorter loan terms, often one to three years
- Prepayment restrictions or balloon payments that make refinancing necessary
Before accepting a mortgage, make sure you understand the full cost of borrowing. Ask questions, review the contract carefully, and compare options. If the terms are unclear or seem too aggressive, consider working with a licensed mortgage broker who can help guide you through the process.
Should you wait and rebuild credit before getting a mortgage?
If your credit score is close to qualifying, waiting a few months to improve it can offer major financial benefits. In many cases, buyers who wait can access lower interest rates, more flexible mortgage terms, and reduced fees.
Reasons to consider waiting include:
- Better mortgage rates and lower monthly payments
- Access to CMHC-insured mortgages with as little as five percent down
- More lender options and fewer restrictions
- A stronger overall financial position when entering homeownership
If your living situation is stable and you are not under pressure to buy immediately, waiting to rebuild your credit may be the smarter choice.
Working with a mortgage broker if you have low credit
A mortgage broker can help you access lenders who are willing to work with credit-challenged borrowers. Many of these lenders are not available directly to consumers and rely on broker relationships for referrals.
Benefits of using a broker include:
- Access to B-lenders and private lenders
- Knowledge of specific credit score requirements
- Fewer credit checks compared to applying with multiple lenders
- A clear plan to move from alternative financing to a bank mortgage later
Look for a broker who has experience working with low-credit files. Ask how they are compensated, what fees to expect, and whether the lenders they work with are licensed and reputable.
Low credit score? Requity Homes may be a solution
If you are not able to qualify for a mortgage today, Requity Homes offers a rent-to-own program that helps Canadians build toward homeownership while they improve their credit and financial standing.
You choose an eligible home within your budget, live in it as a renter, and work toward buying it over a two to five-year term. A portion of your rent is set aside each month as savings toward your future down payment. During this time, you also receive guidance on credit building and mortgage readiness.
Use our rent-to-own affordability calculator to find out how much you can afford.
Requity Homes may be a good fit if:
- Your credit score is below 600
- You are self-employed or have non-traditional income
- You are new to Canada and do not have an established credit history
This model helps bridge the gap between renting and owning, offering flexibility and structure for buyers who are committed to becoming homeowners but need more time to qualify.
Ready to get started? Get pre-qualified to rent-to-own with Requity Homes in minutes.
Frequently asked questions about getting a mortgage with low credit
What is the minimum credit score needed for a mortgage in Canada?
Most A-lenders in Canada require a credit score of at least 620 for mortgage loan approval, especially for insured mortgages. To access favourable interest rates, a score of 680 or higher is often expected. Borrowers with less-than-perfect credit scores may still qualify through alternative or poor credit mortgage lenders, but the terms will not be as competitive.
Can I get a mortgage with a credit score below 600?
Yes. While A-lenders typically reject applications below 600, you can still qualify through B-lenders, private lenders, or rent-to-own programs. Approval depends on your overall credit standing, income stability, and down payment. Even with a poor credit history, showing recent credit improvement and responsible use of financial credit products (like secured credit cards or lines of credit) can help support your mortgage loan application.
How much down payment is needed with bad credit?
If you have less-than-perfect credit, you’ll usually need at least a 20 percent down payment, since you won’t qualify for mortgage default insurance through the Government of Canada (via CMHC or similar agencies). In some cases, private lenders may ask for 25 percent or more, especially if your credit bureau reports show derogatory credit items like collections, defaults, or bankruptcies.
Will CMHC insure a mortgage with bad credit?
Generally, no. The Canada Mortgage and Housing Corporation (CMHC) typically requires a minimum credit score of 600 and a solid payment history. Applicants with poor credit reports, multiple missed payments, or recent bankruptcies won’t qualify for mortgage insurance. In these cases, you must pursue uninsured mortgage options with larger down payments.
What do lenders look at besides credit score?
Lenders assess your credit bureau report from agencies like Equifax and TransUnion, which include your detailed credit history, payment history, credit utilization, and inquiries. They also consider your income, debt levels, TDS ratio (Total Debt Service), and job stability. Some alternative lenders may also accept alternative credit references, such as rent or utility payments, when evaluating your application.
Can I qualify with a thin or new Canadian credit history?
Yes, but it depends on the lender. If you’re buying a home as a newcomer to Canada or have limited Canadian credit history, some lenders will accept alternative credit references such as rent payments, phone bills, or international credit reports. You may also need a larger down payment or a co-signer with a strong credit history.
Can I get a mortgage with a 500 credit score?
It is possible, but only with private lenders, and the terms will be restrictive. You will likely need a down payment of 20 to 25 percent, and you should expect higher interest rates, upfront fees, and short-term financing. These lenders focus more on property value than credit, which makes them suitable for borrowers with derogatory credit or limited borrowing history.
What is considered derogatory credit and how does it impact my application?
Derogatory credit includes items like collections, charge-offs, missed payments, defaulted loans, or bankruptcies listed on your credit bureau report. These red flags reduce your chances of approval with A-lenders and can increase costs with alternative lenders. If you have recent derogatory items, improving your credit for several months before applying may improve your results.
How does credit utilization affect my credit score?
Credit utilization refers to the amount of credit you’re using compared to your total credit limits. High utilization (above 30 percent) can lower your score, even if you pay on time. To improve your score before applying for a mortgage, aim to keep your balances low on all credit products, including credit cards and lines of credit.
Can rent payments help my mortgage application?
Yes, especially in rent-to-own programs. Some providers, like Requity Homes, use rent credits — a portion of your monthly rent is set aside for your future down payment. On-time rent payments may also be used as alternative credit references to support your application if your traditional credit history is limited or imperfect.
What other costs should I budget for beyond the down payment?
In addition to your down payment, plan for closing costs such as land transfer taxes, legal fees, appraisal costs, and title insurance. These can range from 1.5 to 4 percent of the purchase price, depending on your province. Some lenders may also charge broker fees or lender fees, especially if your application involves credit challenges or non-traditional approval paths.
