How much does a consumer proposal affect your credit?

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A consumer proposal might knock your credit score down initially, taking you to an R7 rating. It’s lighter than bankruptcy’s R9. This stays on your credit longer with TransUnion (3-6 years) and Equifax (up to 6 years). Bouncing back is doable; start using secured credit cards during the proposal to build it up again. It’s a softer way to handle debt than bankruptcy. Trustees get paid by the lender and creditor and don’t advocate for Canadians in debt. Beware! Reach out via phone, text, or live chat if you have any questions.

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Consumer Proposal Credit Question

How much does a consumer proposal affect your credit? I’m curious about how much my credit score will drop if I go forward with a consumer proposal.

From: Anonymous Question
Location: Delta, British Columbia (BC)
Category: consumer proposal

Consumer Proposal Credit Answer

A consumer proposal can initially give your credit score a bit of a jolt, likely sending it south due to the formal debt management involved. You’ll end up with an R7 rating, which basically means you’re in a repayment groove. It’s not as harsh as a bankruptcy R9 rating, so that’s a silver lining! Now, how long this hangs around depends: TransUnion could keep it on your record for up to 3 years after you wrap it up, or 6 years from when you first missed a payment, while Equifax might show it for 6 years from the start. So, you might see its shadow longer, based on how quick you clear it and what your past debt dance was like.

But here’s the good news: bouncing back isn’t just wishful thinking—it can start sooner than you think! You can start dusting off that credit score by getting cozy with secured credit cards during your proposal. Show them you’re reliable by keeping up those payments! Keep up the good financial habits post-proposal, and you might notice your score starting to perk up in 2-3 years. In contrast, bankruptcy can sulk on your report for 7-14 years, making consumer proposals a softer approach to tidying up your debt situation.

From: Insider Scott

Office of the Superintendent of Bankruptcy (OSB) Answer

A consumer proposal will generally have a significant impact on your credit score. When you enter into a consumer proposal, it is reported to credit reporting agencies and can result in a drop of approximately 100 points or more, depending on your prior credit score. The proposal remains on your credit report for three years after you complete the proposal or for up to six years from the date it is filed, whichever is longer. This impact is outlined in the context of personal insolvency under the Bankruptcy and Insolvency Act, specifically in sections addressing consumer proposals and their implications for credit reporting.

From: OSB Helper

Related Questions to Consumer Proposal Effect On Credit

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

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

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

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

Filing a consumer proposal can cause a significant drop in your credit score, although the impact is temporary and you can start rebuilding your credit during the proposal period[1][3][5].

3. Can I get a new loan or credit card 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 due to being seen as a higher risk by lenders[1][5].

4. How does a consumer proposal affect my individual credit accounts?

Each creditor included in your proposal will report the debt as ‘included in a proposal’ with an R7 credit rating on your credit report[1][5].

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

Yes, you can start rebuilding your credit score during the consumer 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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