Everyone is always talking about credit scores but no one ever tells you why they’re so important. Your credit score shows how you’ve managed your credit in the past and helps lenders to determine the level of risk you present as a borrower. Whether it’s a credit card provider, car dealer or mortgage lender, each will assess your credit score to understand how financially responsible you are.

Shift expectations to B lenders

When it comes to getting a mortgage, a good credit score is a key requirement for most lenders — especially prime A lenders. If, by chance, your credit isn’t where it needs to be, there are still a few things you can do. Low credit is generally when your credit score is below 620, making it harder to get approved with a Prime A lender. That’s why it’s important to be aware of other options and shift your expectations toward B lenders. B Lenders are companies like Home Trust, Canada Western Bank and ICICI Bank, who are able to help people with lower credit get a mortgage.These lenders offer 1-year and 2-year mortgage options, which enable you to get approved, while giving you time to improve your credit score to refinance in the future to (hopefully) an A mortgage.

Save for a larger down payment

Although your credit score is a major component of your mortgage application – the size of your down payment also matters. In Canada, you are required to put down at least 5% of the home’s purchase price. If you don’t think your credit is where it needs to be, consider aiming for 20% to qualify with a B lender. B lenders will require you to make a larger down payment (20% or higher), rates will be slightly higher compared to A lenders (if interest rates are at 2%, you’ll pay 4% and have a small fee) and you’ll be subject to a one-year or two-year term.

Putting more money toward your down payment means you’ll increase the equity you have in your home, which ultimately means you will owe the lender less over time. The goal with a B lender is to improve your credit over the one to two-year period so that you can later refinance at the end of the term into a Prime A mortgage.

Consider a co-signer or joint mortgage

Sometimes we all need a helping hand. Did you know a co-signer can be used to help you secure a mortgage? A co-signer is a third party who can act as a guarantor of the mortgage and agrees to take over your monthly payments in the event that you default. Your chances of mortgage approval will be instantly improved since the co-signer’s income and credit score will also be considered as part of the application. A co-signer is typically a close family member or friend – someone you can trust to support you on this journey.

Find a mortgage lender who can help you

Low credit does not mean your chances of securing a mortgage are impossible. A crucial part of this process, however, is finding a lender that is willing to work with your specific financial situation. Many lenders will turn down your mortgage application at the first sight of poor credit, which is why shopping around is essential.

At Homewise, we can refer you to various lenders beyond the big banks like credit unions and monoline lenders who can help buyers with lower credit. We’ll search the marketplace to find you the best deal, while helping you navigate any complexities that come your way.

Ready to take the next step? All you have to do is apply online in just 5 minutes and one of our advisors will connect with you to prove that you can improve your credit and buy a home at the same time.