5 steps to rebuild your credit score after bankruptcy

If you’ve had to declare bankruptcy or file a consumer proposal, it takes time to rebuild your credit, but it can be done!

First things first – Pay off your debts to get out of bankruptcy or consumer proposal  

How long your bankruptcy or consumer proposal stays on your file varies, depending on where you live and other factors.

• TransUnion, one of Canada’s credit reporting bureaus, removes a consumer proposal either three years after you have paid off all the debts or six years after you sign the proposal (whichever comes first).
• Equifax removes a consumer proposal from your credit report three years after you have been “discharged” or paid off all your debts in the proposal.
• Both bureaus remove a bankruptcy from your credit report six years after you have been discharged in most provinces, although if you declare bankruptcy more than once it stays on your credit report for 14 years.   

As you can see, the sooner you can pay off those debts and get discharged from your proposal or bankruptcy, the sooner it will be removed from your credit report, so your first priority for rebuilding your credit should be paying off that proposal or bankruptcy as soon as you can.

Successfully paid off your proposal or bankruptcy? These 5 steps will make your credit shine like new

1. Set up good financial habits. Bad habits might have contributed to your having to file the consumer proposal or bankruptcy in the first place, so avoid repeating the past by being honest about why it happened and what needs to change. Learning how to create a budget, so you know how much you have and especially how much you spend, is very important. Research shows it takes more than two months for new behaviour to become automatic – 66 days in fact –  so stick with it and soon it’ll be a habit!

2. Monitor your credit report. You should get a copy several months after your discharge date to make sure all the information in it is accurate. Once a year, you can obtain a free copy of your credit report by mail from TransUnion and Equifax, and online copies are also available, for a fee. If there are any mistakes, contact the credit bureau and ask them to fix them.

3. Pay all your bills in full and on time. Make all payments for utilities, cellphone bills, parking tickets and other bills promptly. Late payments get reported to credit agencies and make it harder to get credit. You can set up payment reminders on your phone or set up automatic payments.

4. Save as much money as you can. This does not affect your credit score of course, but it is important to have some savings to help pay your regular bills on time in case of emergency. Also, if you can get a loan later, you want to have some money to back it up with. For instance, you will be able to get something like a car loan at better rates if you have a large down payment.

5. Get a Savings Loan. A Savings Loan is meant to help you grow savings and build your credit score. A set payment amount gets put into a secured account and you make affordable payments on a set schedule toward this amount. Your payments get reported to the credit bureau, so you’re building your credit score while growing savings.

By taking these steps, over both the short term and long term, you’ll establish a good credit score and be on your way to securing a more successful financial future. 

^Sources:

^{https://www.canada.ca/en/financial-consumer-agency/services/credit-reports-score/information-credit-report.html}

^{https://bankruptcy-canada.com/bankruptcy-blog/fastest-way-to-rebuild-credit-during-and-after-a-consumer-proposal/}

^{https://www.ic.gc.ca/eic/site/bsf-osb.nsf/eng/br02051.html}

^{https://bankruptcy-ontario.org/debt-help-resources/credit-repair-after-bankruptcy/}

^{https://www.nomoredebts.org/blog/credit/how-to-rebuild-credit-canada.html}

^{https://refreshfinancial.ca/blog/credit-tips-and-tricks/recover-bankruptcy-consumer-proposal-step-step-guide/}