Are you worried that your credit history will prevent you from owning the home of your dreams? Although a poor credit rating will affect your mortgage rate, you may be able to get a mortgage even if you have bad credit.

What is your credit score?

Your credit score is a number that indicates how likely you are to repay future debts, which is calculated by a credit bureau. In Canada, your credit score will probably be assigned by either Equifax or TransUnion. This score is based on your credit report, which is basically a summary of your credit history. Your credit history includes personal financial information, credit account information, and your employment history.

If you suspect you have bad credit, you should make sure you know your credit score. You can pay a fee to Equifax or TransUnion for a copy of your credit report, or you could obtain one from your mortgage broker.

How to get a mortgage with a low credit score

If your credit score is below 600, you will probably not be eligible for a mortgage from a prime lender. However, if you can prove you have a dependable source of income you may still be able to get a mortgage with a prime lender. If your income is confirmable, your chances will improve.

A large down payment, too, will significantly help you secure a low mortgage rate.

If your score is around the 550 to 700 range, you may be able to get a mortgage from trust companies or other financial institutions who cater to people with low credit scores, or who have insufficient proof of income for the prime lenders. Typical mortgage rates from these bad credit institutional lenders are from 4.5 to 5.5 per cent.

If your score is very low (less than 600), you might get a mortgage from one of the Private Lenders. These are private companies, or even individuals, who offer loans at much higher rates then prime lenders. A typical mortgage rate from a private lender could be as high as 10 to 15 per cent.