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Bad credit is a reference that brings up a lot of negative connotations. I prefer to use the term, “Bruised Credit”.

A bruise is an area of discolouration caused by a blow or impact. And we all know, bruises improve and can go away if there’s no continued injury.  

If you have bruised credit, it’s imperative to resolve it and re-establish healthy credit history for the best chances of mortgage approval.

What is bruised credit?

Bruised credit can include any or all of the following, which results in specific bruises on the credit bureau report, or contributes to a lower FICO score.

  • Late or missed credit account payments

  • High utilization (maxing your available credit on a regular basis)

  • Account balances over the available credit limits

  • Outstanding collections

  • Recently paid collections

  • Accounts that have been written off

  • Accounts that are involved in credit counselling

  • Bankruptcy

  • Not paying the minimum payment due on credit accounts

  • Other public records, such as Maintenance Enforcement (child support) judgements

  • Unpaid income tax

  • Liens on your home

  • Co-signing for others who have done any of the above on the co-signed account

  • Errors (Lender or credit bureau errors can occur and negatively affect credit)

  • Fraud (Fraudulent actions can have a negative impact credit)

How to Recover:

Depending on the severity of the bruise(s) will determine the exact next steps. However, a general rule of thumb is to do the following;

  • Resolve outstanding collections, liens or judgements

  • Always pay at least the minimum amount due on your revolving credit accounts each month, and ideally more than the minimum

  • Do not miss payments

  • Ensure payments are made on time

  • Pay your credit accounts below the credit limit

  • Ideally, pay those accounts to below half the available credit limit

  • To recover after bankruptcy, consumer proposal or credit counselling, open two new credit accounts after the date of discharge and practice good habits for at least two years

After a credit bruise, many consumers shy away from using credit in fear of the same thing happening. Credit can become bruised very quickly, but rebuilding takes time. Credit will not recover if it’s not used. Be patient and practice good utilization and repayment habits and slowly credit will improve.

Disclaimer - If you have a large down payment of at least 20%, there may be some lenders interested in an application despite credit bruises.

Let’s chat about what lenders are looking for in a good mortgage consumer! We can build a plan to help improve your credit for the greatest chance for a mortgage approval. Call me today! 

Sarah Nixon-Miller, Mortgage Broker
Nixon-Miller Mortgages Inc.
TMG The Mortgage Group
Toll-free 1-844-315-6609