Credit Repair after Bankruptcy

According to our bankruptcy trustees, a number of questions people often ask relate to credit repair after bankruptcy: I filed for personal bankruptcy in Canada - for how long will it stay on my credit report? Can I somehow repair my credit after filing for bankruptcy? Is it possible to erase bad credit history?

Your credit rating determines whether or not you will be able to get a loan in the future. A bad credit report might mean that you will not be able to get a car loan, mortgage, or debt consolidation loan.

A bad mark on your credit report - such as filing bankruptcy - will (except in very special situations) remain on your credit record a maximum of seven years. After that, the information is dropped from your record.

Is credit repair after bankruptcy a possibility or you have to wait the seven years to pass for the record to get cleaned? Unfortunately, you can't totally erase your bad credit,

because you can't remove bankruptcy from your report - but there are things that you can do to improve your credit history. Suggestions on how you can repair your bad credit follow.

(Note: There are credit repair companies claiming they can repair, even totally erase your bad credit; some are scams. For more information, please visit our Bad Credit Report Repair Services: Are They Scams? page.)

How to repair bad credit - the six steps plan

1. Get a credit report

   First, you need to do a credit check on yourself. In most cases you can obtain your own credit report for free, or for a nominal charge. There are two main credit bureaus in Canada:

   • Equifax 1-800-465-7166
   • Trans Union  1-800-888-4213
2. Review your credit report

   Review your credit report for any errors or negative comments.
   
   An error may include a debt that you have already repaid (see #3 below). A negative comment may result from a department store credit card that you stopped using ten years ago, if it had a $10 balance owing, it may still show up on your credit report (see #4 below).

3. Correct any errors on your credit report

   If you find an error, contact the credit bureau and offer proof that you do not owe the money. You may need a letter from the creditor indicating the payments were made, or you may provide canceled cheques to indicates payments were received.
   
   You may also send a letter to the credit bureau explaining your side of the story; your comments can be attached to your credit report.

4. Repair any negative information on your credit report

   If you owe a creditor $10 and they have filed a negative credit report with the credit bureau, repay the creditor and ask the creditor to note on your credit report that the debt has been paid. If a debt is legally owing, the debt must be paid or discharged before it can show on your credit report as being paid or discharged.

5. Pay off debt

   Even if your credit report indicates that you have made all of your regular monthly payments, a potential lender may look unfavorably on high levels of debt.  The solution is to pay off as much of your existing debt as possible before applying for a new loan.

   We recommend that you pay off your highest interest debts first, so pay the 18% interest credit card off first, and then repay the 16% interest credit card.

   The lower your debt, the easier it will be to obtain a loan. Your monthly household budgeting plan should include specific repayment amounts for each of your debts.

6. Take other action

   If you have more debt than you can possibly repay, your credit report will only improve by formally dealing with your debts. You may need to file a formal proposal to your creditors, or consider consumer credit counselling and a debt management plan. For professional advice and further assistance, please contact a debt management consultant or a licensed bankruptcy trustee.

To conclude, you can't erase a bad credit with a personal bankruptcy note on it, but partial credit repair after bankruptcy, and credit improvement in general is possible - and it is in your hands. If you want to obtain a loan in the future, start improving your credit rating now.