Rebuilding Your Credit Rating
If you have undergone bankruptcy or consumer proposal, you will need to consider how to rebuild your credit rating so that it does not continue to negatively impact your credit long-term.
When you file for bankruptcy or consumer proposal, the Office of the Superintendent of Bankruptcy (OSB) notifies the credit bureau. When you declare bankruptcy for the first time, the information will be kept on your credit report for 6 years where multiple bankruptcies will be kept on your credit report for 14 years.
How Long Negative Credit Information Can Be Reported
There are limits for how long negative information can be reported on your credit rating. Please see the below list and contact us if you have any questions.
| Late Payments | 6 years from when the payment was late |
| Collection Accounts | 6 years from the date of delinquency on the original debt (leading up to collection) |
| Charge-offs | 6 years from the date of charge-off |
| Tax Liens | 6 years after they are paid |
| Judgments | 6 years from the date entered by the court |
| Completed Proposal | 3 years from the date it was completed |
| Bankruptcy | 6 years from the bankruptcy discharge date |
In general, you are not responsible for requesting that the credit reporting agencies stop reporting negative information that is outdated. They should do this automatically. However, it is a good idea to check your credit reports 30 to 60 days after the information is scheduled to be removed from your credit report. This ensures that the negative information is removed and can help keep you financially accountable.
How to Rebuild Credit
Rebuilding your credit is a crucial step for getting back on your feet and getting back to normal again. You will be able to get a bankruptcy discharge after the consumer proposal has been completed and this consumer proposal will stay on your credit report for three years.
Although your credit report will reflect your discharged bankruptcy or completed consumer proposal, it does not prevent you from obtaining credit. When deciding if they will lend you money (and if so, how much), creditors will look at your ability to repay the debt and take into account your income, debt to income ratio and collateral. After this step is complete, the creditor will use your credit report to review your payment history. The more time that passes between the discharge date or the completed proposal, the better the likelihood of getting approved for credit.
Credit Rebuilding Tips
You can easily start to rebuild your credit by consistently paying your bills on time and by setting aside money each paycheck to start to build your savings again. Although many of my clients find themselves nervous to use credit again after filing for bankruptcy or consumer proposal, credit is essential to rebuilding your credit score and can be done safely and with caution
- Positive credit information.
Things like paying your bills on time and maintaining low balances can help improve your credit score. Ideally, you don’t want to spend more than 75% of your available credit on an individual credit card in order to keep your score positive. - Avoid applying for new credit.
Unless you have a genuine need for a new account, applying for multiple credit cards can hurt your credit score. Lenders see this as a sign that you need to have several different credit accounts due to financial issues or that you are overextending your ability to pay the credit back. - Pay attention to small details.
Although it is important to work on larger issues like judgements and charge-offs, the specific personal information on your credit report is almost equally important. Be sure that your name is not misspelled and that your address is correct – this will help prevent your credit information from getting mixed up with someone else’s. - Beware of credit reporting double jeopardy.
When a collection account is unpaid, it might be sold from one credit agency to another which means that the number of collections accounts and the amount of debt you owe could be inflated. - Be more mindful.
With a negative credit score, one late payment is all it takes to result in a big drop in your credit score. Make sure all bills are paid on time by setting up auto pay or by setting yourself a calendar reminder that it’s time to pay a bill. - Use a secure credit card.
If you are able to use a secure credit card that is reported to the two credit reporting agencies (Equifax and Trans Union), it will help you establish a new, positive credit reference. Some cards only report to one credit agency so be sure to do you research when finding the right card for you. - Dispute credit report mistakes ASAP.
We recommend reviewing your credit report once per year so that you can catch any wrong or inaccurate information. Rather than filing an online dispute, we recommend sending a letter to the credit reporting agency and the lender who has given them the wrong information. You will need to do this with each credit reporting agency since they do not share information with one another. - Review your credit score monthly.
This is something that you can quickly do each month and it will let you monitor your progress and make goals for the coming months. Credit reports and scores are generated when they’re requested which means that as soon as negative information is removed (or positive information is reported), your scores can change. Equifax has a fee-based services that will help you do this monthly if you need some extra help.
For credit counselling services or for more information on how to handle bankruptcy or a consumer proposal, please contact the experts at Dana MacRae Trustee in Bankruptcy today.