Most of the people I meet with ask me: “How long does it take to get my credit back after my bankruptcy or consumer proposal is over?” There are two answers to this question. How long bankruptcy will remain on your credit report and what you can do to rebuild your credit.
How Long Does Bankruptcy Remain on Your Credit Report?
Your credit report will have a record of your bankruptcy for a minimum of six years after you are discharged; a proposal remains on your credit report for a minimum of three years after you have completed all of your payments.
This means that if you apply for a loan or credit card during these time periods, the lender will know that you went bankrupt or filed a proposal, which may make it more difficult to borrow.
Rebuilding After Bankruptcy
However this does not mean you have to wait out this period to begin to rebuild. Your credit report is only one factor in your ability to borrow.
Other factors include
- your income,
- whether you have a co-signor,
- the amount of your down payment, and
- if you have assets that can secure the loan.
If you can demonstrate that you have learned how to handle money, you will repair your credit relatively quickly.
My advice is to start saving money. A bankruptcy or consumer proposal generally results in much lower monthly payments than those you were making against your debts before you filed bankruptcy. Clients often find that they can begin the process of saving money immediately after filing because their budget improves. These savings can be used as a down payment on a car, or even for a mortgage on a house. How quickly you repair your credit depends on you, and your ability to save money.
Once your bankruptcy or proposal is over, and you have some savings to use as an emergency fund, consider using some of your savings to get a secured credit card. Use this credit card wisely by paying down the balance in full every month. This not only saves you money in interest, is shows future creditors that you can handle credit responsibly.
Bankruptcy or a consumer proposal is the first step in rebuilding poor credit. Find out how. Talk to a Hoyes, Michalos bankruptcy trustee today.