Does the size of the default matter?

The amount of debt and the time it took to settle it can significantly affect your chances of getting a loan. 

Here are some terms you should know: 

• Clean credit: No defaults so far. 
• Near prime: Minor default of less than $500 that was paid over a year ago or excessive inquiries on your credit file. Most lenders can approve a loan for you without any problems. 
• Below average: Default amounting to less than $1,000, paid over six months ago. Some prime lenders and major banks may lend you up to 80-85%, assessing on a case-by-case basis. 
• Bad credit: More than $1,000 in defaults but all paid. You can get approval with a specialist lender. If you have a very good explanation backed up with evidence, you may be able to borrow 80% of the property value with one of our banks. 
• Serious credit impairment: More than $5,000 in defaults where some are paid and some are unpaid. You still have a chance of approval with a private, specialist, or non-conforming lender. 

How do lenders see a history of late repayments? 

Late payments, even if overdue by just two weeks, get listed on your credit file. They can lower your credit score, although not as severely as a default. The good news is that certain specialist lenders and specific banks may still review and consider your home loan application. The key is to find the lender that suits your particular situation. 

In the past, lenders could only view the paid or unpaid defaults on your credit file. However, with the adoption of Comprehensive Credit Reporting (CCR) by many lenders today, they can now assess your complete repayment history. 

Duration of Default on Credit File 

A default will persist on your credit file for five years if the payment was overdue. However, if the default was lodged because the lender couldn’t contact you, it remains on your credit file for seven years. 

Removing a Default from Your Credit File 

Unfortunately, removing a default from your credit file is not possible. Even if you pay the default, it doesn’t eliminate it. However, making the payment changes its status to ‘paid,’ which lenders view more favorably.