Credit Policy4: Who Gets the Money? Borrower Eligibility in Real-World Lending

There’s a moment in every underwriter’s career when you realize: you’re not just approving loans, you’re choosing borrowers. And who you lend to is just as important as what you lend on.

In the non-bank space, we pride ourselves on saying “yes” where others say “no.” But that doesn’t mean every borrower qualifies. It means we need a clear, consistent view of borrower eligibility. One that reflects our risk appetite, supports responsible lending, and protects capital.

More Than Just a Credit Score

In traditional lending, eligibility often starts with a number. Beacon 680? Good. Beacon 580? Bad. But in private lending, things are a little more nuanced.

We look at the full picture:

• Income consistency (even if not from traditional employment)

• Stability of residence

• Credit history vs. credit score

• Debt behavior - not just balances, but how they’re managed

• Intent is the borrower trying to get back on track, or over-leveraging again?

I have worked to approve deals for  self-employed borrowers with scores in the 500s, but zero missed payments, strong equity, and a proven track record of managing variable income. That’s good risk, even if it doesn’t look that way on paper. What creates that scenario? It could be a number of things, thin credit, too many inquiries or legals unrelated to the borrowers borrowing history.

Borrower Red Flags to Watch For

Your credit policy should outline what constitutes unacceptable borrower risk. Some examples include:

• Recent mortgage or consumer proposal

• Current or past fraudulent behavior

• Unverifiable income

• Multiple delinquent trade lines

• Undisclosed liabilities or legal issues

None of these are automatic declines—but they require deeper analysis, higher risk adjusted pricing, or perhaps a firm “no” depending on your policy.

Borrower Type Matters Too

Different borrower types carry different risk profiles—and your policy should treat them accordingly:

• Self-employed: Require business financials, bank statements, and T1 generals.

• New to Canada: Consider residency status, employment type, and credit history (or lack thereof).

• First-time buyers: Often well-intentioned, but higher risk without a clear support system or education.

Eligibility isn’t about making judgments. It’s about measuring alignment between the borrower’s story and your lending philosophy.

Clarity = Speed + Confidence

When eligibility criteria are clear, underwriters can move faster. Brokers can pre-qualify smarter and your team spends less time going back and forth and more time funding deals that fit.

One of the best things you can do is build a simple borrower eligibility matrix into your policy: what’s required, what’s nice to have, and what’s an automatic red flag. Trust me, your team will thank you