Will Collections Impact Your Mortgage?

Lee Welbanks • March 13, 2024

A question that comes up from time to time when discussing mortgage financing is, “If I have collections showing on my credit bureau, will that impact my ability to get a mortgage?” The answer might have a broader implication than what you might think; let's spend a little time discussing it.


Collections accounts are reported on your credit bureau when you have a debt that hasn’t been paid as agreed. Now, regardless of the reason for the collection; the collection is a result of delinquency, it’s an account you didn’t realize was in collections, or even if it’s a choice not to pay something because of moral reasons, all open collections will negatively impact your ability to secure new mortgage financing.


Delinquency


If you’re really late on paying on a loan, credit card, line of credit, or mortgage, and the lender has sent that account to collections, as they consider it a bad debt, this will certainly impact your ability to get new mortgage financing. Look at it this way, why would any lender want to extend new credit to you when you have a known history of not paying your existing debts as agreed?


If you happen to be late on your payments and the collection agencies are calling, the best plan would be to deal with the issue head-on. Settle the debts as quickly as possible and work towards establishing your credit. Very few (if any) lenders will even consider your mortgage application with open collections showing on your credit report.

 

If you’re unaware of bad debts


It happens a lot more than you’d think; people applying for a mortgage are completely unaware that they have delinquent accounts on their credit report. A common reason for this is that collection agencies are hired simply because the lender can’t reach someone.


Here’s an example. Let’s say you’re moving from one province to another for work, you pay the outstanding balance on your utility accounts, change your phone number, and make the move. And while you think you’ve paid the final amount owing, they read your meter, and there is $32 outstanding on your bill. As the utility company has no way of tracking you down, they send that amount to an agency that registers it on your credit report. You don't know any of this has happened and certainly would have paid the amount had you known it was due.


Alternatively, with over 20% of credit reports containing some level of inaccuracy, mistakes happen. If you’ve had collections in the past, there’s a chance they might be reporting inaccurately, even if it's been paid out.


So as far as your mortgage is concerned, it really doesn’t matter if the collection is a reporting error or a valid collection that you weren’t aware of. If it’s on your credit report, it’s your responsibility to prove it’s been remediated. Most lenders will accept documentation proving the account has been paid and won’t require those changes to reflect on your credit report before proceeding with a mortgage application.


So how do you know if you’ve got mistakes on your credit report? Well, you can either access your credit reports on your own or talk with an independent mortgage advisor to put together a mortgage preapproval. The preapproval process will uncover any issues holding you back. If there are any collections on your bureau, you can implement a plan to fix the problem before applying for a mortgage.


Moral Collections


What if you have purposefully chosen not to pay a collection, fine, bill, or debt for moral reasons? Or what if that account is sitting as an unpaid collection on your credit report because you dispute the subject matter?


Here are a few examples.


  • A disputed phone or utility bill
  • Unpaid alimony or child support
  • Unpaid collections for traffic tickets
  • Unpaid collections for COVID-19 fines


The truth is, lenders don’t care what the collection is for; they just want to see that you’ve dealt with it. They will be reluctant to extend new mortgage financing while you have an active collection reporting on your bureau.


So if you decide to take a moral stand on not paying a collection, please know that you run the risk of having that moral decision impact your ability to secure a mortgage in the future.


If you have any questions about this or anything else mortgage-related, please connect anytime! It would be a pleasure to work with you!

Lee Welbanks
Four coworkers in a bright office meeting around a laptop and papers, discussing work at a wooden table

Debt Cosolidation Strategy

By Lee Welbanks • July 22, 2026
How to Get Out of Debt Faster Debt has a way of quickly spiralling out of control, particularly if you face one of life’s most common financial obstacles – such as job loss/wage reduction, separation/divorce or illness/death. But, fortunately, there are debt-reduction strategies available to get you out of debt quicker and remain debt free! One popular debt-reduction strategy tackles your smallest debt balances first before moving up the chain to pay off larger ones. When the smallest debt is paid in full, you roll the minimum payment you were making on that debt into the next-smallest debt payment. Here’s how it works in bite-sized steps: Record your debts from smallest to largest regardless of interest rate Make minimum payments on all your debts except the smallest one Pay as much as possible on your smallest debt Repeat until each debt is paid in full Focus on outstanding balances, not interest rates If your largest debt has the largest interest rate, it’s going to be a long time before you even see a dent in that crazy balance of yours. But when you stick to the smallest balance plan, you’re going to feel a true sense of accomplishment as you pay off that debt super quick. That excitement is what’s going to motivate you to keep working hard until you’re completely out of debt. This debt strategy is effective because it’s all about changing your behaviour. And once you see positive results, you’re more encouraged to stay the course until you’re out of debt. Example Let’s say you have four different debts: $500 dental bill – $50 payment $2,500 credit card debt – $63 payment $7,000 car loan – $135 payment $10,000 student loan – $96 payment Using this debt strategy, you make minimum payments on everything except the $500 dental bill. Since you’re paying $550 a month on the dental bill (the $50 minimum payment plus the extra $500), that debt is completely gone in one month. Now you can take the freed-up $550 and attack your credit card debt, paying a total of $613 ($550 plus the $63 minimum payment). In about four months, you’ll be waving goodbye to that credit card debt too! Next, you’ll tackle the car loan to the tune of $748 a month ($613 plus $135). In 10 months, you’ll be driving a vehicle you actually own. By the time you reach that dreaded student loan (your biggest debt), you can put $844 a month towards it. That means you’ll be making your final payment in just 12 months. With all your hard work and sacrifice, throwing extra money into your debt strategy and staying focused on the goal, you’ll have paid off $20,000 in just 27 months! Wondering if this is the right debt strategy for you? I’m always here to help. Answers are a call or email away.

Mortgages Aren’t One-Size-Fits-All

By Lee Welbanks • July 22, 2026
Why the Cheapest Mortgage Isn’t Always the Smartest Move Some things are fine to buy on the cheap. Generic cereal? Sure. Basic airline seat? No problem. A car with roll-down windows? If it gets you where you're going, great. But when it comes to choosing a mortgage? That’s not the time to cut corners. A “no-frills” mortgage might sound appealing with its rock-bottom interest rate, but what’s stripped away to get you that rate can end up costing you far more in the long run. These mortgages often come with severe limitations—restrictions that could hit your wallet hard if life throws you a curveball. Let’s break it down. A typical no-frills mortgage might offer a slightly lower interest rate—maybe 0.10% to 0.20% less. That could save you a few hundred dollars over a few years. But that small upfront saving comes at the cost of flexibility: Breaking your mortgage early? Expect a massive penalty. Want to make extra payments? Often not allowed—or severely restricted. Need to move and take your mortgage with you? Not likely. Thinking about refinancing? Good luck doing that without a financial hit. Most people don’t plan on breaking their mortgage early—but roughly two-thirds of Canadians do, often due to job changes, separations, relocations, or expanding families. That’s why flexibility matters. So why do lenders even offer no-frills mortgages? Because they know the stats. And they know many borrowers chase the lowest rate without asking what’s behind it. Some banks count on that. Their job is to maximize profits. Ours? To help you make an informed, strategic choice. As independent mortgage professionals, we work for you—not a single lender. That means we can compare multiple products from various financial institutions to find the one that actually suits your goals and protects your long-term financial health. Bottom line: Don’t let a shiny low rate distract you from what really matters. A mortgage should fit your life—not the other way around. Have questions? Want to look at your options? I’d be happy to help. Let’s chat.