Do Private Mortgages Help or Hurt Your Credit Score? The Real Story
July 20, 2025 | Posted by: Alex Vinarski
If you're considering a private mortgage, you're probably wondering: How will this affect my credit? The truth might surprise you—in most cases, private mortgages help improve credit scores when used wisely. Here’s why:
1. Most Private Lenders Don’t Report to Credit Bureaus
✅ 99% of private lenders do not report mortgages to Equifax or TransUnion—meaning simply having the loan won’t show up on your credit file.
✅ Brokers and some private lenders perform a 'hard inquiry' when you apply, which can lower your score by 2-3 points temporarily (rebounds in 3-6 months)..
Key Takeaway: Just getting a private mortgage usually has very little impact on your credit score.
2. Private Mortgages Can BOOST Your Credit Score
Here’s how:
✔ Pay Off Credit Card Debt (Major Credit Score Boost)
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Credit cards have high utilization impact (maxed-out cards hurt scores).
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Using private mortgage funds to pay off credit cards lowers your utilization ratio, which can increase your score by 50+ points.
✔ Avoid Missed Payments (Prevent Credit Damage)
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If you’re struggling with mortgage/credit payments, a private mortgage can:
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Lower monthly payments (vs. credit cards or high-rate loans).
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Prevent late payments (which destroy credit scores).
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✔ Consolidate High-Interest Debts
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Private mortgage rates (6-12%) are often lower than credit cards (20-30%).
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Lower payments = easier to stay current = long-term credit improvement.
3. When Could a Private Mortgage Hurt Credit?
⚠ Only if you default and face foreclosure (rare if you make payments).
⚠ If the lender reports to bureaus (very uncommon)—always ask first.
4. Smart Credit-Building Strategy
1️⃣ Use private mortgage funds to pay off high-interest debts (credit cards, personal loans).
2️⃣ Keep all payments on time (even if not reported, avoid default).
3️⃣ Refinance to a traditional mortgage later when your credit improves.
Bottom Line
???? Most private mortgages don’t appear on credit reports.
???? Used wisely, they can significantly improve your score by:
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Eliminating credit card debt
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Preventing missed payments
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Lowering monthly obligations
???? Only risk? Foreclosure (but this is rare with proper planning).
Need a Private Mortgage That Helps Your Credit?
I specialize in structuring private mortgages to reduce debt and improve credit health. More information on private mortgages here: https://www.ipotekacanada.com/index.php/private-mortgages
