Wondering what to do if you have bad credit and are looking to get a home equity loan from a BC lender? We have the best advice for you in this blog, so all you have to do is read on!
When it comes to how the real estate market works, Canada has it pretty much figured out. Similar to the USA, Canada has implemented a credit score system that enables you to leverage more credit lending power based on a good credit history. In other words, as soon as you take your first loan, your credit history will become available to both lenders and credit bureaus.
There’s a wide range of loans the regular consumer can enjoy in Canada, and home equity loans are some of the most popular for many reasons. Simply put, they enable homeowners to borrow a lump sum against the equity of their homes. What’s important to remember though, is that their ability to get a good loan will be impacted by their credit score.
When talking about bad credit loans in BC, remember that bad credit will definitely put a damper on a homeowner’s ability to borrow money using their home’s equity.
Before we go into the ins and outs of BC bad credit home equity loans, let’s dive into what a credit score is, how it’s calculated, what kind of information it addresses and how exactly it can impact a homeowner’s ability to get a home equity loan.
What Is a Credit Score In Canada, And Who Creates It?
There’s a distinction between a credit report and a credit score. The first time you ever apply for a credit loan, your credit report will also be created, containing all your credit history. Lenders will then have access to the credit history regardless of the province the loan applicant comes from. They’ll equally know if they’re working with bad credit loans in BC or with good credit loans in QC.
On the other hand, a credit score is a specific three-digit number that stems from the unique information in your credit report. This number shows a potential lender how well you manage your credit, enabling them to assess whether it’s risky or not to lend you the required amount of money.
Two main credit bureaus establish your credit score in Canada, and these are:
What Is Included In Your Credit Report?
Your credit report contains a wide array of information. It ranges from personal data — name, date of birth, passport, etc. — to financial information related to bankruptcy, credit you use, including lines of credit and loans, credit cards and retail cards, debts sent to collection agencies and so on.
If we’re talking about bad credit loans, BC lenders will be able to see if you’ve missed a payment, have gone over your credit limit, or have any negative financial patterns.
What Is Considered a Good Credit Score?
There are such things as good credit scores and bad credit scores. Having said this, there are minimum credit score requirements for anyone looking to get a home equity loan. Lenders will often ask you to have a credit score of at least 620. To them, this is the threshold that tells them you’re not a risky loan applicant. Of course, the higher the score, the better the terms you benefit from.
If you don’t qualify for this score, you will automatically fall into the bad loan category. That is not as disastrous as it sounds though, since many alternative lenders in BC will offer you good loans even with a bad credit score.
The Ins And Outs Of Bad Credit Home Equity Loans In BC
BC homeowners that want to get an amount of money against their home’s equity, but have a poor credit score, can still get the loan they want. However, these loans typically come with a higher interest rate to protect the lender. Bad credit home equity loans in BC will need to meet pretty much the same requirements as the ones in other Canadian provinces.
The key idea here though is that private lenders are not as strict with what they expect from borrowers’ credit history as banks and credit unions. What you need to remember is that even when working with private lenders, you will still need to prove that you have enough equity in your home to be able to get the loan. This can be done by providing a copy of the property assessment or home appraisal and a copy of the title deed.
Some lenders might also ask you to provide proof of income. These can be pay stubs, tax returns, references from employers and landlords — or other people who can attest to your character and ability to repay the loan.
Having proved this, you’ll be able to get what is called a bad credit home equity loan and will be able to access funds that otherwise may have seemed impossible to get. To sum it up, bad credit loans in BC are not just a possibility, they can become a reality for homeowners looking to get the loan they need.
If you have bad credit or are just starting to build your credit report, you may worry that getting a home equity loan is unachievable. Private lenders and working with a mortgage broker are, then, the perfect aids in your journey to get the loan you need.
Here, at YourEquity.ca, we can help you leverage your credit score and get the home equity loan you need to finally move ahead with your dreams.
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