One of the biggest concerns expressed by people considering bankruptcy in Canada is how filing bankruptcy will affect their credit score and how they can repair their credit after bankruptcy. Whether you declare bankruptcy, file a consumer proposal, or do a debt management plan, all will appear on your credit report and negatively affect your credit. However continuously missing payments because you cannot afford to repay your debts is not helping your credit either.
How Long Will It Stay On My Credit Report?
- a first bankruptcy will remain on your credit report for six years after you are discharged. If you are discharged in nine months, that means a note about your bankruptcy will remain on your credit report for just under seven years.
- a consumer proposal or debt management plan will remain on your credit report for three years after all of your payments are completed. That means if your repayment plan lasts three years, a note remains on your credit report for 6 years (3 + 3). If you pay off your proposal or plan early, the note will be removed sooner.
Can You Rebuild Your Credit
The simple answer is yes, but it will take some time.
If you are thinking of applying for a new loan, and want to qualify for a lower interest loan, you will need to have a good credit score. Start by understanding what factors go into determining your credit score.
If your credit score is low, and you would like to improve it, follow our six key strategies to rebuild your credit.
What if you want to buy a home in the near future so you need to rebuild your credit a little faster?
One of our recommended strategies after bankruptcy is to consider a secured credit card. While this may be a good start to rebuilding your credit, if you are thinking of applying for a larger loan, like a mortgage, your prospective lender usually asks that you have a good repayment history on a minimum of $5,000 of new credit obtained after your bankruptcy or consumer proposal.
Being approved for a low credit score loan can be costly, both in terms of fees and interest rates. In addition, if you are not financially able to make your payments you could find yourself in debt trouble all over again.
Beware fast credit repair scams.
There are credit repair companies claiming they can repair, even totally erase your bad credit; some are scams targeting people desperate for new credit. For more information, please visit our Bad Credit Report Repair Services: Are They Scams?
As you can see, while a bankruptcy or consumer proposal does appear on your credit report, it is possible to rebuild your credit and borrow after bankruptcy. If you think bankruptcy, or a consumer proposal, can help you eliminate your current debts so you can start fresh, please contact an advisor.