While bankruptcy and consumer proposals can release you from the pressure and worry of creditors and debt, your journey is not over. Now that your papers are filed, you need to start rebuilding your credit. While your first bankruptcy will remain on your credit report for seven years, and a consumer proposal for three, there are many things you can do in the meantime.
Tips and Tricks
1. Look at your credit report. It is very important to be sure that your credit report is accurate and all debts that should have been cleared actually are. Your credit report should also have the kind of agreement you made—bankruptcy or proposal—and the dates they went into effect. Errors can slow the process of rebuilding your credit.
2. Make agreed-upon payments. If you filed a consumer report, be sure to make your payments on time. If you miss three payments, your agreement is void and your creditors can take legal action against you. If you are unable to make payments, you should file a proposal addendum to avoid voiding your agreement.
3. Get a secured credit card. A secured credit card is a credit line guaranteed by a previous deposit. For example, to have $1,000 of credit, you would have to deposit $1,000 with the card’s bank. Basically, you provide collateral for your credit. If you miss a payment, the bank can take some money from the deposit to pay your balance. But since the bank reports to a credit reporting bureau, any payments you make on-time will improve your report.
As with any other credit line, you should read the fine print. Not all secured credit cards are the same and can have high-interest rates and annual fees.
4. Get an RRSP loan. If you haven’t been making your full contribution to your Registered Retirement Savings Plan (RRSP), you can take out a bank loan to make up the difference. Banks are usually more willing to extend RRSP loans. Not only will you increase your retirement savings, but making payments on the loan will improve your credit.
5. Make sure to stay within your budget. None of this will do any good if you aren’t staying within a budget and are instead running up credit card debt again. The habits you created before you filed for bankruptcy or a consumer proposal will be hard to break, but making new habits and consistently paying your bills every month will make the biggest difference in your credit report.
Just one of these things will help your credit report in the long run. Imagine what would happen if you tried several.
As always, if you have questions, be sure to ask your trustee or financial advisor.