Some lenders in Canada need to see your credit score before making the decision on a loan application. This is one of the biggest criteria considered by institutional mortgage lenders in Canada. The term credit score is a formula that translates all the information in a person’s credit report into a number upon which lenders can make their lending decisions. The numbers range from 300-900 and the higher it is the better. Our team has been able to help people with poor credit apply for bad credit mortgages in Thorold for many clients.
Credit Scores Needed by Different Lenders
Transunion and Equifax are the main credit bureaus charged with calculating credit score in Canada. The exact formula used is a big secret but you can always request your report by accessing these credit reference bureaus websites. It will take about three weeks to get your credit report after sending copies of identification and some background information to Equifax or Transunion. It is wise to keep checking your credit report to look for any errors that might be the cause of your poor credit score. Credit bureaus have great relations with banks, businesses, and lenders, which means that they can access your credit score when looking to make a clear lending decision. Our brokerage also does credit reporting so just reach out to our staff whenever you need a free, accurate copy of your score. Late payments, non-payments, writing bad checks and credit length are some of the factors contributing to low scores.
If your credit score shows any value below 550 you know that banks and credit unions will not help. Our bad credit mortgage lenders in Thorold, Ontario will provide this loan without looking at your credit score. A bad credit mortgage is a kind provided by private lenders who are not deterred by consumer proposals, low scores, or bankruptcy in the last two years.
Private lenders must have a way of assessing the risk of a borrower and without relying on credit score; they use the LTV of a property. This is a measure obtained by dividing the total number of debts in a home by its most recently appraised selling price. People with bad credit are no doubt a big default risk meaning that private lenders must protect themselves. This is why they will not lend against any property whose loan to value ratio is above 85%. We have many lenders in our network who will not hesitate to provide mortgages in Thorold to those who meet this important criterion.
After determining that a lender is worthy of a bad credit mortgage, the private lender has to charge high interest. This is a way of protecting themselves from the consequences of bad credit habits often exhibited by clients whose score are low. Most private lenders charge interest rates of 7%-15% on bad credit mortgages but they also require clients to take care of mortgage processing fees. Many professionals are needed to complete the process but private lenders will leave you to pay lawyers, home appraisers, and others to avoid any extra costs. The mortgage act allows these lenders to use a registered mortgage, which gives them the power to sell off the property if a borrower defaults. These lenders must, however, wait for mortgage holders who went before them to recoup before they can lay claim to any proceeds. This is why they avoiding giving mortgages to the property with too much debt as it reduces their odds of profiting from its sale.
Late payments, taking too much debt and failure to pay bills are some of the reasons for poor credit scores. It is possible to right the situation but it takes lots of commitment. Start by clearing all pending bills and ensure a clean slate. Make only small charges to your credit card to make repayments more affordable. You might also like a secured credit card to take care of overdue payments without hurting your credit score. The deposit made on such a card acts as insurance for debt but only if you stay within its 60% limit. Consistently repaying your debts for 6 months will certainly improve your score but it might take a while before getting to the much-desired 550 points.