A homeowner in Hamilton with $300,000 in equity and a credit score in the low 500s can still hear "no" from every big bank on the street. The equity is real. The bank just can't see past the score.
A HELOC with bad credit in Canada is possible, but rarely from a major bank. Federally regulated lenders cap revolving home equity credit at 65% of your home's value and screen hard on credit. With a weaker score, your realistic options are usually a credit union, a B lender, or a private second mortgage that works like a HELOC in practice.
Start with what the bank is actually checking. Once you know which rule stopped you, you'll know which lender to call next.
Why a HELOC with bad credit is hard to get at a bank
Every big bank HELOC decision starts with rules set by the Office of the Superintendent of Financial Institutions (OSFI) under Guideline B-20. Each bank then adds its own credit policy on top.
The 65% ceiling
OSFI expects federally regulated lenders to keep the revolving part of a HELOC at or below 65% of your home's value. You can borrow more against the home, up to 80% on an uninsured mortgage, but anything above 65% has to be an amortizing loan with regular principal payments. So even a perfect borrower hits a hard limit.
The stress test
Banks also qualify you at a higher rate than the one you'll pay. As of 2026, OSFI's minimum qualifying rate is still the greater of 5.25% or your contract rate plus two points. If your income barely covers payments at today's rates, the stress test can knock you out before your credit score even comes up.
Debt ratios
Lenders measure how much of your income goes to housing and total debt. CMHC guidelines cap the gross debt service (GDS) ratio at 39% and the total debt service (TDS) ratio at 44% for insured mortgages, and most banks apply similar limits to HELOCs.
Credit score and history
Each bank sets its own cut-off, but most want a score comfortably in the mid-600s or higher for a HELOC. Recent missed payments, collections, or a consumer proposal on your file usually mean an automated decline, no matter how much equity you have.
That last point is where most people get stuck. The bank's system reads the score first and the equity second. If the score fails, nobody looks further.
Where you can still access home equity with bad credit
After a bank decline, your equity is still there. You just need a lender that underwrites differently. Here's how the main routes compare for a borrower with bruised credit.
| Option | Who it suits | Credit flexibility | Typical cost | Term |
|---|---|---|---|---|
| Credit union HELOC | Fair credit, steady provable income | Moderate | Close to bank pricing | Open, revolving |
| B lender equity loan | Fair to weak credit, some income gaps | Moderate to high | Higher than a bank | Usually 1 to 3 years |
| Private second mortgage | Weak credit, strong equity | High | Highest, plus fees | Usually 6 months to 2 years |
| Private first mortgage refinance | Needs to pay out the existing mortgage too | High | High, plus fees | Usually 1 to 2 years |
Credit unions
Credit unions are provincially regulated, not federally, so OSFI's B-20 rules don't bind them directly. Some use that room to look at your whole file. It's worth a call if your score is fair rather than poor.
B lenders
B lenders (often trust companies) sit between the banks and private money. Revolving credit lines are less common here, but a lump-sum equity loan is often on the table for borrowers with a patchy credit history.
Private second mortgages
For many homeowners with low scores, this is the practical answer. A private lender focuses on your equity, the property, and your plan to repay, rather than the score alone. You get a lump sum instead of a revolving line, and it costs more. We break down the trade-offs in our guide to the second mortgage vs. HELOC decision.
Here's what that looks like with numbers. Say your Hamilton home is worth $700,000 and you owe $400,000. A bank HELOC at 65% caps total borrowing at $455,000, which leaves you $55,000, if you qualify at all. A private lender comfortable at 80% combined could consider up to $160,000. Higher cost, but it's money the bank wasn't going to lend you.
The right choice depends less on the rate and more on how long you'll need the money and how you'll pay it back.
The 4-point equity access check
Before you apply anywhere, run through what we call the 4-Point Equity Access Check. It takes an evening, and it changes how lenders read your file.
- Know your real equity. Look up recent sales on your street or get a quick opinion from a local agent. Divide what you owe by that value. If you're already above 80%, most lenders will pass, private or not. Our breakdown of how much equity you need for a private mortgage covers this in detail.
- Pull both credit reports. Get your free reports from Equifax Canada and TransUnion Canada. Look for errors, old collections that should have dropped off, and balances you can pay down before applying.
- Document your income. Salaried? Two recent pay stubs and a letter of employment. Self-employed? Your last two Notices of Assessment from the Canada Revenue Agency plus six months of bank statements.
- Write down your exit plan. Private equity loans are short-term. Know whether you'll repay by rebuilding your credit and refinancing with a bank, selling, or paying down from income. Here's how a private mortgage exit strategy usually works.
So why bother? Because a lender can only approve what it can see on paper.
Mistakes that make bad-credit equity borrowing cost more
Most of the extra cost in bad-credit equity borrowing comes from avoidable decisions made before and during the application.
Applying everywhere at once
Every bank application usually triggers a hard inquiry. Five applications in two weeks can drop your score further and make the next lender more nervous. Pick your route first, then apply.
Borrowing more than the plan needs
With a private loan, you pay interest on the full lump sum from day one. Borrow for the actual need, not the maximum you're offered.
Ignoring the fees
Private and B lender deals often carry lender, broker, legal, and appraisal fees. Ask for the total cost of borrowing in writing. The Financial Consumer Agency of Canada has plain-language guidance on what lenders must disclose.
Skipping the stress test question
If you've already failed the mortgage stress test at a bank, a HELOC application there will likely fail for the same reason. Don't reapply until something in your file has changed.
Honestly, if your credit took a hit from one bad year and you're sitting on real equity, an automated bank decline shouldn't be the final word on your home.
Solid Capital is a Canadian alternative lender that looks at the full file (your equity, your income, and the story behind the score) instead of stopping at a credit number. We work with homeowners and business owners the big banks have declined or under-served. If that's you, start your application with Solid Capital. It takes about five minutes, there's no impact to your credit to apply, and a Canadian advisor reviews every file personally.
Lead with your equity and your repayment plan. The score is only part of the story.
Frequently Asked Questions
Can I get a HELOC with a credit score under 600 in Canada?
It's unlikely at a major bank, since most set HELOC cut-offs well above 600. Some credit unions and B lenders will review lower scores if your income and equity are strong. For many borrowers under 600, a private second mortgage is the more realistic way to access equity.
Does applying for a HELOC hurt my credit score?
A bank HELOC application usually triggers a hard inquiry, which can lower your score slightly for a period of time. Several applications close together have a bigger effect. Solid Capital's application has no impact to your credit to apply.
Is a second mortgage better than a HELOC if I have bad credit?
With bad credit, a second mortgage is often the only option you'll actually be approved for. A HELOC is cheaper and more flexible, but banks reserve it for stronger credit files. A second mortgage costs more, so it works best with a clear, short-term plan to repay.
How much can I borrow against my home with bad credit?
Banks cap revolving HELOC credit at 65% of your home's value under OSFI rules. Many private lenders will consider combined borrowing up to roughly 75% to 80% of the value, depending on the property and your file. Your available amount is that limit minus what you already owe.
Can I get a HELOC after a consumer proposal or bankruptcy?
A bank HELOC is difficult until the proposal or bankruptcy is discharged and you've rebuilt some credit. Private lenders can sometimes help sooner if you have solid equity. Many homeowners use a short private loan, then refinance with a bank once their credit recovers.
