How does a consumer proposal affect my credit?

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Filing a consumer proposal can impact your credit score with an R7 mark, but it’s better than bankruptcy’s R9. This mark lingers for six years or three years post-proposal. Meanwhile, getting new credit can be pricey, and you might need to bid farewell to credit cards temporarily. The good news? Smart financial habits can boost your credit score over time. Reach out via phone, text, or live chat if you have any questions.

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Consumer Proposal Question

How does a consumer proposal affect my credit? What happens to my credit score when I file a consumer proposal, and how long does it take to recover?

From: Anonymous Question
Location: Vaughan, Ontario (ON)
Category: consumer proposal

Consumer Proposal Answer

Filing a consumer proposal will give your credit score a bit of a knock, earning an R7 mark on your credit report. It’s not as hard-hitting as bankruptcy, which claims an R9 rating. That consumer proposal stamp sticks around for six years from the filing date or three years after you wrap up the proposal, whichever comes first. Once cleared, those pesky debts make their exit from your credit report about 6-7 years after the initial default date. Getting new credit during this period isn’t off the table, but it might feel a bit like shopping in a high-end boutique on a tight budget—expect some limited choices and maybe a premium price tag in terms of higher interest rates or fees. Plus, goodbye credit cards…for now.

The silver lining? You can bring your credit score back to health by cultivating smart financial habits once you’re done with your proposal. Those reminders of your R7 days will disappear three years after you make your last payment, but getting your score back to its former glory might take some time. Have questions? Feel free to give us a ring, drop a text, or chat with us live.

From: Insider Adam

Office of the Superintendent of Bankruptcy (OSB) Answer

Filing a consumer proposal negatively impacts your credit score, as it is considered a form of insolvency. When you file a consumer proposal, it will be reported on your credit file and classified as a “R7” rating, which indicates that you are in a debt settlement plan. This rating can lower your credit score significantly.

The consumer proposal remains on your credit report for three years from the date of completion or up to six years from the date of filing, whichever comes first (Under the Bankruptcy and Insolvency Act, Section 66.28). Recovery of your credit score after a consumer proposal can vary, but many individuals begin to see improvement within a couple of years after completing the proposal, provided they manage their debts responsibly and establish positive credit behaviors. For more information on how your credit score is affected, check out the section on credit score impact of consumer proposals.

Thus, while a consumer proposal initially harms your credit score, careful financial management following its completion can lead to gradual recovery.

From: OSB Helper

Related Questions to Consumer Proposal Affect On Credit Score

Here are the top 5 most frequently asked questions related to the impact of a consumer proposal on credit, along with brief answers:

1. How does a consumer proposal affect my credit score?

A consumer proposal will initially lower your credit score and limit your ability to obtain new loans, but this impact is temporary[1][3][5].

2. How long does a consumer proposal stay on my credit report?

A consumer proposal will remain on your credit report for up to six years from the date you file, or three years after you complete the proposal, whichever is sooner[1][5].

3. Can I get new loans or credit cards with a consumer proposal on my credit report?

Yes, it is possible to get new loans or credit cards, but your options may be limited, and you may face higher interest rates or fees[1][5].

4. How does a consumer proposal appear on my credit report?

A consumer proposal appears in the legal or public records section and in the individual credit accounts section with an R7 credit rating[1][5].

5. Can I start rebuilding my credit during a consumer proposal?

Yes, you can start rebuilding your credit during the proposal by using a secured credit card, paying bills on time, and keeping credit utilization rates below 30%[1][5].

If you have a question about debt see our debt questions or ask your own debt related question.

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