Making a consumer proposal or assignment in bankruptcy results in R7 or R9 credit ratings respectively. An R7 rating remains on your credit report for 3 years after completing your proposal while an R9 credit rating remains on your credit report for 6 years after receiving your discharge from bankruptcy.
Your credit rating is based on your credit history and isn’t determined by any single event. Re-establishing a strong credit rating requires you to consistently make the required payments to a creditor who reports that good behavior to the two credit bureaus (Transunion and Equifax).
Two ways to start reporting good behavior to the credit bureaus after filing a consumer proposal or assignment in bankruptcy are to obtain a secured credit card or have someone co-sign a regular credit card application for you.
Secured credit cards require you to pay your credit card bill in advance. For example, you provide the secured credit card company with $500 and are then able to spend up to $500. When the bill comes, you pay it on time, replenish your account to $500, and the secured credit card company reports that on-time payment to the credit bureau.
Regular credit card companies also report payment history to the credit bureaus, but it is unlikely that you’ll be able to obtain one on your own after filing a consumer proposal or assignment in bankruptcy. That’s where a family member or friend with acceptable credit can lend a hand and become equally responsible for your credit card by co-signing for you. No upfront payment is required and the credit card company will report your on-time payments to the credit bureau and help you to re-establish a strong credit rating.
When considering the impact of a consumer proposal or bankruptcy on your credit rating keep the current strength of your credit rating in mind. Many people who are dealing with too much debt struggle to make payments. After these missed payments are reported to the credit bureau your credit rating may not be as strong as you may think. This is why it’s important to regularly obtain your credit report for free to understand your score and ensure that it accurately reflects your credit history.
Welker and Company holds helping its clients rebuild their credit as a top priority and is happy to assist every client with any credit related questions during their two free credit counselling sessions.
If you have questions about your financial situation, or the information presented above, don’t hesitate to contact us.