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How does a Consumer Proposal and Bankruptcy Affect Your Credit?

Having a good credit score is important in Canada to qualify for debt such as a credit card or mortgage with lenders. Having a poor score will limit the debt options available to you and increase the interest rates you will be offered.

Many things can affect your credit score such as missed payments, high utilization of your debt, closing accounts. In addition, starting a payment plan to reduce your debts such as a credit counselling, consumer proposal or bankruptcy can also affect your credit.

Here is a summary of items that can negatively affect your credit score:

  • Bankruptcy will have a R9 rating on your credit until completion plus 7 years

  • Consumer Proposal will have a R7 rating on your credit for 3 years after completion to (maximum of 6 years from filing date with Transunion)

  • Credit Counselling will have an R7 rating on your credit for 2 years after completion

  • Collection, lawsuit, foreclosure will stay on your credit for 6 years (Equifax) 7 years (Transunion)

  • Late payments for 6 years from the month of the missed payment

  • If your credit score has already been negatively impacted due to debts being sent to collection or missed payment, then filing a consumer proposal or bankruptcy may not impact it much more.

Sometimes to improve your credit you first need to take a short term hit on your credit score to build your financial foundation. to begin the process of rebuilding your credit. You can start rebuilding your credit once you have filed a consumer proposal, you don’t need to wait until after it is completed

Contact us for more information on how to reduce your financial stress and improve your credit.

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