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Repairing Your Credit after Bankruptcy and Proposal
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Repairing Your Credit after Bankruptcy and Proposal
Once you’ve been discharged from a bankruptcy (or completed a consumer proposal), you have the opportunity to make a fresh start financially — to repair your credit and leave behind your previous life of indebtedness. But while your bad debts may be forgiven, your insolvency is not quickly forgotten.
Your bankruptcy will appear on your credit report for six years following discharge (even longer if you went bankrupt more than once). A consumer proposal will appear on your credit report for three years following completion. This means that if you apply for credit, the lender will learn of your (recent) bankruptcy or proposal.
Even so, there are several steps you can take to gradually restore your creditworthiness.
● Open a bank account. Open a new savings account with a bank that was not one of your creditors when you went bankrupt. No matter what your credit history is, you cannot be denied an account because of it.
● Save as much money as possible. Draw up a weeklybudget and stick to it. Try and save at least 5% of your paycheque. Spend only on essentials such as rent, groceries, medicine and transportation. Give up those double lattes and pricey restaurant meals. Take inexpensive vacations.
● Stay up-to-date on your mortgage. If you were able to hang on to your house despite the bankruptcy and have kept your mortgage payments current, you will likely be able to renew the mortgage without difficulty at any time after your bankruptcy discharge. Maintaining the mortgage with on-time payments will definitely help rebuild your credit rating.
● Correct any ruinous habits. It’s important to understand what caused your bankruptcy. If it was due to losing your job or suffering an illness, these were probably factors beyond your control. But if it was addictive behaviour that got you into your financial bind, you need help in preventing a repetition of such ruinous indebtedness.
Substance abuse and shopaholic binges are prominent addictions that can result in insolvency, but the Bankruptcy and Insolvency Act specifically cites gambling as a “fact” that bars an automatic discharge. The bankruptcy Court may impose rehabilitative measures as a condition of discharge. These may include addiction counselling, participation in the Ontario Lottery & Gaming Corp.’s self-exclusion program and not gambling for a period of time,
● Obtain a secured credit card. If you give the credit-card issuer, say, $500, they will keep the $500 as a security deposit, and give you a credit card with a $500 charge limit. Your monthly payments will be reported to the credit bureau, so you are taking a first step in improving your credit score. But don’t charge more than you are sure you can repay in full each month. Nevercarry a credit card balance that’s over 50% of your credit limit.
● Take out a small loan – Obtain a personal loan so that you have new credit reporting. Make all your payments on time every month. A late payment will further harm your credit score. Choose a loan company that specializes in repairing credit with open, affordable, same-day loans to discharged bankrupts and even current ones.
● Limit your credit requests. Be cautious about applying to multiple sources of credit. If too many potential lenders ask the credit bureaus about your credit during a short period, it may have a negative impact on your credit score.
If you take the above steps, you’ll leave insolvency behind and successfully restore your creditworthiness.
Prudent Financial offers the lowest-cost rates for people with bad credit histories in Toronto and the GTA. For more information about PRUDENT FINANCIAL SERVICES, visit our web site: http://www.prudentfinancial.net
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