Could Zombie Debt Haunt Your Mortgage Application?

Zombie Debt Mortgage

We usually associate zombies with Hallowe'en, but when it comes to old debts they could revive when you least expect it. More and more Canadians are facing record-high levels of debt, due in part to extremely low interest rates. If you've passed the point when budgeting will help you get your finances back on track, chances are zombie debt has caught up with you.

What is zombie debt?

Zombie debt involves unsecured credit, such as credit cards, lines of credit, and phone bills. It can come in many forms, including legitimate debts that have been forgotten or ignored, cases of identity theft, or computer error. Ultimately, it is an old debt that is causing problems for you.

How can zombie debt impact my mortgage?

While old lines of credit will eventually fall off your credit report and no longer be used to calculate your credit score, the statute of limitations is usually longer than people would like when they are looking to buy a house. And until then, those unpaid debts will continue to drag down your file any time you apply for additional credit, such as a mortgage loan.

A mortgage lender will be able to see that a collection agency is reporting an unpaid debt in your name and may consider you to be a higher risk borrower. They may make an exception in the case of fraud or identity theft, but if you've left those errors uncorrected for months – or years – it can be more difficult to make a case.

What can I do about my zombie debt?

There are many solutions for bad credit; the most important thing you can do is take charge of your finances and consult a professional. Depending on the age and amount of the debt, your options will vary.

If you own a home, leveraging some of the equity you've built through a mortgage refinance could be enough to bury that debt for good. And if buying a home is on your radar, zombie debt or a history of bad credit doesn't have to hold you back.

The Auxilium Team is here to support you. Give us a call at 250-590-6520 (toll-free 1-855-590-6520) to see how we can work with you to put debt in the past. Walk-ins are welcome at our 307 Goldstream Avenue location during regular business hours, and we can arrange appointments evenings and weekends to suit your schedule.


Auxilium Mortgage Corporation is based in Victoria, BC and works with clients locally and across Canada. The Auxilium team has over 100 years of combined financial experience and access to dozens of lenders to help you meet your goals.