How Does a Consumer Proposal Affect My Credit Rating?
A consumer proposal will drop your credit rating to one of the lowest levels at most Canadian credit bureaus. With this rating, you are less likely to be able to obtain credit from lenders and insurers. A consumer proposal will stay on your record for three years after your last payment.
What is a Credit Rating?
A credit rating in an estimate of how well a person meets their financial commitments, according to payment history and current loan status.
Equifax, one of Canada’s largest credit bureaus, measures your credit score on a scale of R1 to R9. An R1 rating means you make payments on time, whereas an R9 means you have declared bankruptcy. If you have filed a consumer proposal, you will have an R7 rating—a very low credit score that will remain unchanged until your proposal ends.
How Does a Low Credit Score Affect Me?
Having low credit can create challenges that you may have not expected. You will be considered high-risk, so lenders may decline to take you on as a borrower. If you are able to obtain credit, it will be expensive: lenders are unlikely to offer low interest rates to borrowers with poor credit scores. You may even find it harder to get a new job if a prospective employer seeks permission to check your credit history.
How Long Will a Consumer Proposal Stay on my Credit Record?
Equifax and TransUnion state that it takes three years for a consumer proposal to be taken off your credit score after a last payment. That means the faster you fulfill your obligations and pay off your debts, the sooner you'll be able to rebuild your credit rating.
Is a Consumer Proposal Right for me?
Consumer proposals are generally considered a less drastic alternative to declaring bankruptcy, but to qualify your total debts must be less than $250,000 (not including a mortgage) and you should have a reliable income to make monthly payments. A Licensed Insolvency Trustee can help you decide if a consumer proposal is the ideal fit for your situation. Get started today with a free confidential consultation.