How Long Does Bad Credit Actually Block a Mortgage in Ontario?

The question almost always arrives the same way: "How long do I have to wait?" There was a bankruptcy, or a proposal, or a stretch of missed payments, and somewhere along the way the person decided a mortgage was off the table until an invisible penalty clock ran out.

Two things are usually true. The clock is shorter than they think. And the clock isn't what's holding up the file anyway.

Removal dates are not approval dates

Start with the actual reporting windows, because they're fixed and public.

Missed payments stay on your Equifax file for six years from the date they're reported. Collections run six years from the date of first delinquency — the original missed payment, not the day the account was handed to an agency. Paying a collection doesn't pull it off your report, though it does soften its effect on your score.

Consumer proposals come off three years after you finish paying, or six years from the date you filed, whichever arrives first. That's the strongest argument there is for finishing a proposal early rather than riding it out.

Bankruptcy is where the bureaus diverge, and it matters in Ontario. Equifax removes a first bankruptcy six years after discharge. TransUnion holds it for seven years in Ontario. A second bankruptcy sits for fourteen. Since lenders don't all pull the same bureau, the answer to "is it off my report yet" can genuinely be "depends which one they check."

Now the important part: none of those are the dates you can borrow. Lenders don't require a clean file. They require a file they can price.

Three tiers, and roughly where each begins

A lenders — the big banks, credit unions, monolines — generally want a score in the 650–680 range and up, with clean recent history. Lowest rates, least flexibility, no lender fee.

B lenders start from around 550. Worth saying plainly, because the name does them no favours: these are federally regulated institutions, not a shadow market. Home Trust, Equitable Bank, MCAN. They price at roughly 1–2% above bank rates plus a lender fee of about 1% of the mortgage, and they read the story rather than just the number. Someone two years past a discharge with clean payments since is a completely different file from someone currently missing payments — even when the scores look similar.

Private lenders largely set the credit score aside and underwrite the property and your equity instead. Pricing is a range, never a posted rate: currently around 7.9%–12.9%, almost always interest-only, plus a lender fee of 2–5% of the amount advanced and, on some files, a brokerage fee. Every one of those must be disclosed to you in writing before you commit. In Ontario, private mortgages can only be dealt by mortgage agents holding a Level 2 licence, or by mortgage brokers.

Our guide to mortgage options with bruised credit maps profiles to tiers in more detail.

What underwriters weigh more heavily than the number

Recency. A late payment from four years ago is nearly weightless. One from four months ago is not. Twelve months of clean history moves a file further than almost anything else you can do on purpose.

Explanation. Underwriters are people reading a story. A credit event with a clear cause — a separation, a medical leave, a business that failed and was wound up properly — reads very differently from a pattern with no account attached to it. Presenting that context to the right underwriter is the actual work, and it's most of what separates an agent who shops your file from one who just broadcasts it.

Equity. The one that surprises people most. Below 80% loan-to-value, options widen at every tier, because the lender's downside is covered by the property rather than by your history. Credit matters most when equity is thin — which is also why the same credit profile gets a very different answer on a refinance than on a purchase with 5% down.

The realistic route back to bank rates

For most borrowers who go alternative, the plan is one to three years at a B or private lender while the blocker resolves — credit seasons, self-employment income reaches two filed years, or the debt that caused the decline gets cleared. At renewal, the file gets re-shopped to A lenders.

That exit should be written down on the day you sign, not discovered at maturity. If nobody has told you specifically what needs to change and by when, ask before committing to anything. It's a fair test of whether you're being advised or sold to, and the answer usually arrives fast.

One tailwind worth knowing: since November 2024, moving your existing balance and amortization to a new lender at renewal no longer requires passing the stress test. That makes the eventual move back to an A lender easier than it was — though the new lender still underwrites your income and credit in full.

What to take from this

Waiting passively for a credit event to age off your file is almost always the slowest available route. Twelve months of deliberate, clean payment history plus a lender tier that actually fits your current profile will get you further than three more years of hoping for a better score.

If you want to know which tier your file lands in today, a licensed mortgage agent can tell you without a credit check and without an application. It costs nothing to ask, and it beats guessing.