How Long Bankruptcy Remains on Your Credit Report
1) A first bankruptcy will remain on your credit report for six years after discharge. This is extended to 14 years for a second bankruptcy.
2) A consumer proposal remains on your credit report for three years after you have completed all of your payments.
If you are worried about the effect bankruptcy will have on your credit report, you should know that it is possible to repair your credit after filing bankruptcy. In fact, declaring bankruptcy is often the first step. You can read more on how in our article about How a clean credit report is not necessarily a good credit report.
Rebuilding Credit after Bankruptcy
The objective of declaring bankruptcy is to allow you to eliminate debts that are currently causing financial problems. Ignoring those debts will not improve your credit score. Life after bankruptcy provides you with an opportunity to begin the process of repairing your credit score and improving your credit rating.
Here are some steps you need to take to restore your credit health:
- Pay all bills on time.
- Get a copy of your credit report every four to six months after completion of your proposal or bankruptcy to ensure information on the report is accurate and up to date. If there are errors, contact the credit reporting agency directly (since your trustee does not report directly to the credit bureau; all reporting is done by the Office of the Superintendent of Bankruptcy).
- Open a savings account and use the account for savings and emergency funds. Savings don't get reported to the credit bureau so savings don't directly rebuild your credit, but savings do improve your finances, and those savings may help you borrow in the future, such as when you use your savings as a down payment on a car or house.
- Consider getting a secured credit card. After completion of your bankruptcy or after your proposal is accepted by the creditors, obtain a secured credit card. For example, Home Trust Visa offers secured credit cards; more information can be found on the Home Trust Visa page.
- Apply for only one secured credit card as multiple applications will show on your credit file and potentially lower you score. Obtain the card only after saving monies that can serve as a deposit against use on the card. If you cannot save the monies, it is not wise to hold an unsecured credit card. Ignore any limits given on the card; only use the deposit as the limit amount.
- Use any credit card obtained very sparingly and pay the balance as soon as used or as soon as the billing arrives. Interest is calculated on the initial balance and delayed payments result in a lower rating.
Fresh Start Credit Rebuilding Program
At Hoyes Michalos we want to help you take full advantage of the fresh start you can achieve by filing bankruptcy or a consumer proposal to eliminate your debt. To help, we have developed a comprehensive education and support program for our clients designed to provide you with the skills and resources you need to rebuild your finances and your credit after filing insolvency. The Hoyes Michalos Fresh Start Recovery Program enhances the mandatory credit counselling required when you file insolvency with additional tools, support and special online resources about budgeting, credit repair, dealing with creditor calls and much more. Our goal is to help you achieve a full financial recovery.
The Best Advice
Pay your bills on time. Don't bounce any cheques. Don't overdraw your account at the bank (even if you have overdraft protection). Show the credit system that you are a responsible money manager and that when you borrow money, it's because you want to, not because you have to. In this way you will repair your credit and avoid a bad credit report in the future.
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