Did you know that over 40% of Canadians don’t know their credit score before applying for a mortgage? Yet, it’s one of the biggest factors that can affect your approval and interest rate. Let’s break down the credit score minimums Canadian lenders are looking for in 2025 — and how to improve yours if you’re not quite there yet.

Different Types of Lenders in Canada: A Comprehensive Guide

When you’re applying for a mortgage in Canada, one of the biggest decisions you’ll face is choosing what type of lender to work with. While most people think of big banks first, there’s actually a wide ecosystem of lenders — each with different requirements, flexibility, and rates.
This guide will walk you through the three main types of mortgage lenders in Canada — A lenders, B lenders, and private lenders — and help you figure out which one fits your unique situation.

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A Lenders: Traditional Mortgage Providers

A lenders are Canada’s prime lenders — major banks, credit unions, and other financial institutions. They offer the lowest interest rates and the most familiar borrowing experience.
But there’s a catch: you’ll need to meet strict qualification criteria to be approved. This includes having a high credit score (typically 680+), a stable income, and a low debt-to-income ratio.

Typical A Lender Borrower

Someone with a full-time salaried job, a clean credit report, and a solid down payment (minimum 5%) on a home that fits insurer guidelines.

Pros:

• Access to the lowest rates on the market
• Well-established institutions with full-service banking
• Mortgage insurance options available for high-ratio mortgages

Cons:

• Rigid rules and a long approval process
• Not ideal for self-employed or non-traditional income earners
• Harder to qualify if your credit is bruised or your debt is high

Mini Verdict: Best for borrowers with strong financials who want long-term stability and the lowest rates.

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B Lenders: Alternative Solutions for Unique Borrowers

B lenders — also known as alternative lenders — serve borrowers who fall just outside A lender criteria. This could be due to a low credit score, higher debt load, or income that’s harder to verify (like self-employed income).
B lenders often include smaller banks, trust companies, and Mortgage Investment Corporations (MICs). They’re more flexible but usually charge slightly higher interest rates.

Who Might Use a B Lender?

• A contractor or freelancer with fluctuating income
• Someone with a recent consumer proposal or bankruptcy
• A homebuyer with significant assets but poor credit history

Pros:

• More lenient qualification standards
• May accept alternative income verification (bank statements, business invoices, etc.)
• Faster approval process than major banks

Cons:

• Higher rates and fees than A lenders
• Often shorter mortgage terms (1–3 years)
• May require larger down payments

Mini Verdict: Ideal for borrowers in transition — whether you’re rebuilding credit or proving income outside of a T4 slip.

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Private Lenders: The Most Flexible — but Costly — Option

Private lenders are individuals or corporations that fund mortgages directly, without being bound by institutional or federal lending rules. They’re mostly used when time, income, or credit barriers make traditional borrowing impossible.
These mortgages are equity-based, meaning your approval relies more on how much equity or down payment you have rather than your income.

When Does a Private Lender Make Sense?

• You’re in a time-sensitive deal and need fast funding
• You’re flipping a property or doing a short-term renovation
• You’ve been declined by both A and B lenders

Pros:

• Fast funding — sometimes within a few days
• Minimal documentation needed
• Flexible repayment structures (interest-only, balloon payments)

Cons:

• Highest rates on the market (often 8%+)
• Usually 6–12 month terms with no renewal guarantee
• Hefty fees and legal charges upfront

Mini Verdict: Private lenders are a short-term fix, not a long-term plan. Use them when you have a clear exit strategy (e.g., refinancing with a B lender later).

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Visual Comparison: A vs B vs Private Lenders

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Choosing the Right Lender: What Should You Consider?

Picking the right lender isn’t just about the best rate — it’s about fit. Here are some things to think about:

• Credit Score: Under 680? A lenders might be off the table.
• Income Type: Self-employed or commission-based? B or private lenders may offer more flexibility.
• Down Payment: The more equity you have, the easier it is to qualify — especially with private lenders.
• Speed: Need funds fast? B or private lenders can move quicker than big banks.
• Long-Term Plan: Private lending works best as a bridge. Don’t rely on it for more than 1–2 years.

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Common Myths About Non-Traditional Lenders

Myth 1: Only people with bad credit use B or private lenders
Reality: Many B lender clients have good credit but fall short on income or debt criteria.

Myth 2: Private lenders are shady or unregulated
Reality: Reputable private lenders follow provincial rules and often work with licensed brokers.

Myth 3: Once you go B or private, you’re stuck forever
Reality: Many borrowers use B and private lenders as stepping stones. With better financials, you can move back to an A lender.

“Among these, alternative lenders stand out for their flexibility—especially for self-employed buyers or those with lower credit scores.”

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Final Thoughts

The Canadian mortgage landscape is more flexible than most borrowers realize. If the banks say no, that doesn’t mean you’re out of options.

Whether you’re self-employed, facing credit hurdles, or just starting out, there’s likely a lender out there who fits your situation.
“In today’s market, newcomers to Canada are increasingly turning to B-lenders, despite steep rates, to get approved for a mortgage.”

🏦 Find the Right Mortgage Lender
Not sure whether a big bank, credit union, or alternative lender is right for you? We make it easy to compare all your options — so you get the best fit, not just the best rate.

🔍 Explore Your Lender Options in Canada
Discover the different types of lenders available to you in Canada, from big banks to private lenders. Find out which option fits your needs and helps you secure the best mortgage deal. Talk to a Mortgage Expert