Does a consumer proposal impact your credit score?

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A consumer proposal can impact your credit score, like a flag alerting lenders you can’t meet all debts. If your credit is already low, which it probably is, the hit might be less noticeable compared to someone with a good score. It remains on your credit report for up to six years.

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Question

Does a consumer proposal hurt your credit? I’m concerned about what kind of hit my credit score will take if I go this route. It’s really important to me to know how much it might affect my future financial plans. What’s the impact here?

From: Anonymous Question, Ontario (ON)

Debt Insiders Answer

Sure, a consumer proposal does dent your credit score, but just how much depends on where you currently stand and your financial backstory. Think of it as a flag on your credit report, signaling to lenders that you can’t pay back all your debts. This can give your credit score a pretty big hit, staying visible for three years from when you finish the proposal, or six years from when you start it—whichever is shorter. If your score’s already in the doldrums because of missed payments or other missteps, the effect might not be as jarring as it would be for someone whose credit was cruising along smoothly.

From: Anonymous Question

Office of the Superintendent of Bankrupty (OSB) Answer

Yes, a consumer proposal will impact your credit score negatively. When you file a consumer proposal, it will be recorded on your credit report as a “Consumer Proposal” or “DC” (debt counselling) for a period of three years after the proposal is completed, or for a total of six years from the date of filing, whichever is longer. This negative mark can significantly lower your credit score.

You should keep in mind that while it may hurt your credit initially, the long-term benefits of resolving your debts may help restore your financial health and credit profile over time. If necessary, refer to the Bankruptcy and Insolvency Act (RSC 1985, c 11) which governs consumer proposals for further details on the effects on your credit.

From: This answer is provided by scanning the OSB Bankruptcy & Insolvency Act and related directives

Related Questions

Here are the top 5 most frequently asked questions related to the impact of a consumer proposal on credit, based on the provided sources and general online trends:

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

A consumer proposal stays on your credit report for three years after the proposal is completed or six years from the date it was filed, whichever comes first.

2. How much does a consumer proposal affect my credit score?

A consumer proposal can lower your credit score by 100 to 200 points.

3. What credit rating do I get when I file a consumer proposal?

When you file a consumer proposal, your credit rating will typically be revised to an R7 or R9, depending on the status of your debts.

4. Can I get credit while in a consumer proposal?

Yes, you can apply for a secured credit card while in a consumer proposal, but it is advisable to exercise caution.

5. How can I rebuild my credit after a consumer proposal?

You can rebuild your credit by making timely payments on a secured credit card, using credit wisely, and monitoring your credit report for any errors or discrepancies.

References

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