As Licensed Insolvency Trustees, we often get asked how to rebuild credit after completing a consumer proposal or bankruptcy. When debt becomes overwhelming, and you’ve chosen to do something about it, namely filing a consumer proposal or bankruptcy, you’re already on the road to financial freedom. That being said, debt and the various debt solutions can have an impact on your credit score. While it can take time to rebuild, it may not be as difficult as you think. Here are some things that you can do to help get things back to a place where borrowing isn’t a major hassle.
- Get a secured credit card. With a secured credit card, you (the cardholder) make a deposit to the credit institution and this becomes your limit on the card. Each month you are required to make regular payments to the card (to pay off your ‘balance’), but if you default the money comes from that initial deposit. Keeping up the regular payments helps to rebuild credit as it shows positive credit activity.
- Pay any and all of your bills on time. This includes things like hydro and gas, insurance, even your phone bill. These all report to your credit report and having good credit history will boost your score.
- If you’re in a consumer proposal, try to pay it off as quickly as possible.
- Save some money. When you’re ready to finance a large purchase, a vehicle for example, a large down payment usually makes it possible to do so at a decent interest rate.
- Make sure that, once you have been discharged, this has been reported to the credit reporting agencies. You want your credit report to reflect that you have completed your proposal or bankruptcy obligations. Making sure that there are no errors on your report is also a good idea. You can do this by requesting your credit report from both Equifax and Transunion. If you find any errors, document these and send, by registered mail, a letter and any supporting evidence to support.
Other tips on how to rebuild credit once you are discharged from bankruptcy or completed your consumer proposal include:
- Keep balances low on all credit products. When you pay off a credit card, or pay it down significantly, keep it that way. However, if you can’t pay off a big chunk, at least try to keep the balance low.
- Avoid applying for too much credit. When you apply for any type of credit product, this gets reported to your credit report, and when you continually apply for credit this negatively impacts your overall credit.
- Pay more than the minimum payments as often as possible.
At Spergel, your financial freedom is our ultimate goal. We are here to help you find a solution to your debt problems, including how to rebuild credit both during and after filing a consumer proposal or bankruptcy.
For more information, call us today to schedule a free consultation: 310-4321.