How to Rebuild Your Credit to Qualify for a Mortgage

> Quick Answer: Rebuilding credit for a mortgage takes most people 12 to 24 months, and longer if a collection, consumer proposal or bankruptcy is still reporting. The steps are: pull both credit reports, dispute errors, resolve collections, open two active accounts and keep them perfect, hold your card balances under 30%, and stop applying for new credit six months before you apply for a mortgage.

What score do you actually need?

Most A-lenders, we are talking the big banks and monoline lenders, want to see about 680. Some will go to 660 with strong income and a solid down payment. Insured mortgage programs set a floor closer to 600, but a floor is not a target. Below roughly 660 you're usually looking at a B-lender, which means a higher rate , fees and a shorter term.

Your score matters, but it isn't the whole file. Lenders also want to see payment history over time, more than one type of credit, and no unresolved derogatory items. If you have a 690 score that is sitting on top of an unpaid collection, you can still get declined.

The steps to rebuild your credit for a mortgage

1. Pull both credit reports, not just a score

Get your full report from Equifax and TransUnion. The free score in your banking app isn't what a lender sees, and the two bureaus rarely hold identical information. Most lenders pull both.

Read the whole report. For every negative item, write down the date it's scheduled to drop off your credit report. Those dates are your real timeline that you need to be working from.

2. Dispute anything that's wrong

Reporting errors are common. Some errors could be: accounts that aren't yours, a paid debt still showing a balance, a collection reported twice, a wrong delinquency date. Dispute them in writing with the bureau as quickly as possible. The sooner you get these errors fixed, the sooner your score can start improving.

3. Deal with collections

Pay collections off as quickly as you can. A paid collection hurts less than an unpaid one and there are many lenders that won't approve you at all with an unpaid collection on file.

Understand what you're buying, though. In Canada, a collection generally stays on your report for six years from the date of first delinquency, whether you pay it or not. Paying marks it "paid” but it doesn't reset the clock and it doesn't delete the item. That's why paying a collection is where rebuilding starts, not where it ends.

4. Get two active accounts reporting

You can't rebuild or establish a credit score without credit. Lenders generally want to see at least two active accounts, reporting on time, for about two years.

If you can't get approved for a regular credit card, start with a secured card, where your deposit sets the limit. It reports to the bureaus the same way. Add a second type of credit after a few months, something like a small installment loan because lenders want to see that you can handle both revolving and installment credit.

5. Never miss a payment

Payment history is the single biggest factor in your score, and a missed payment can stay on your report for six years. Put every bill on automatic payment for at least the minimum, then pay more manually.

If money gets tight, call the lender before the payment is late. An arrangement made in advance usually doesn't get reported the same way a missed payment does.

6. Keep your balances low

Use under 30% of your credit limit, and under 10% if you can manage it. A $1,000 limit means keeping the balance under $300.

This is the fastest lever you have. Utilization is calculated from your last reported statement balance, so paying down a card before the statement date can move your score within one or two cycles. Nothing else in credit rebuilding works that fast.

7. Don't close your oldest card

Length of credit history counts. Many people make a mistake of paying off a credit card and then closing the card. Closing an old card shortens your history and cuts your total available credit, which pushes your utilization up. Keep it open and put one small recurring charge on it or use it once a month for gas, then pay it off right away.

8. Stop applying for credit before you apply for a mortgage

Every application for credit creates a hard inquiry. A cluster of them reads as financial stress. Stop opening new accounts at least six months before your mortgage application, and don't finance a car or furniture in that window. New debt also raises your debt service ratios, which lenders weigh alongside your score.

9. If you've filed a consumer proposal or bankruptcy, know your dates

These have their own timelines, and they decide when you can realistically apply for a mortgage.

Most A-lenders also want to see two years of re-established credit after discharge. Start rebuilding the day you're discharged, not the day the item falls off.

10. Get a mortgage professional to review your file early

Don't wait until you think you are ready to buy. A broker can tell you which items are actually blocking approval and which of them lenders will overlook. That review is free, and it usually shortens the timeline.

How long does rebuilding take?

If your file is clean and you're just thin on history, 12 to 24 months of two accounts reporting perfectly is often enough. If a collection, proposal or bankruptcy is still reporting, your timeline is set by the later of two dates: when that item falls off, and when you've built two years of clean history behind it.

That's the honest answer, and it's the one most people don't get from a twenty-minute meeting at the bank.

Where rent-to-own fits

Rebuilding takes time your family may not have, especially if you're moving every year because your landlord sells or you are worried that it won’t be a buyer’s market forever. That's the gap Clover was built for. Our terms run two to four years with an optional one-year extension, which gives your credit the runway it needs while you live in the home you intend to buy.

Rent-to-own is a bridge to an A-lender mortgage, not a replacement for one. If your gap is under a year, renting and rebuilding will cost you less, and we'll tell you so.

The bottom line: find your dates, fix your errors, get two accounts reporting perfectly, and keep your balances low. Then check in with a mortgage professional a year before you plan to buy.

_General information only, not mortgage, legal or credit-repair advice. Credit reporting rules and lender requirements vary and change. Speak with a licensed mortgage professional about your own file. No score improvement or mortgage approval is guaranteed._

Can you actually fix your credit?

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