If you’re considering a consumer proposal in Canada, you might be wondering how this will affect your credit score and how long a consumer proposal stays on your credit history. After all, your score is an important factor when it comes to applying for financial assistance.
So, how long does a consumer proposal stay on your credit report in Canada?
In Canada, A consumer proposal will stay on your credit report for 3 years after the date you have paid off your consumer proposal, or 6 years from the date your consumer proposal started (whichever is sooner).
Even if you haven't yet filed for a consumer proposal, you might be considering it as an option to help get your finances back on track. If so, you probably have some questions about how the consumer proposal process will affect your financial status.
Here are answers to some of the most common questions about how a consumer proposal affects your credit report in Canada.
What is a Consumer Proposal?
Before we dive into how a consumer proposal affects your credit report, it's important to understand what a consumer proposal is.
Put simply, a consumer proposal is an option available to Canadian residents who are struggling with debt. It is a legal process that allows you to negotiate with your creditors to pay back a portion of what you owe, and have the remainder of your debt forgiven. A consumer proposal can stay on your credit report for up to three years after it is filed, but it will not have the same negative impact on your score as a bankruptcy.
How a Consumer Proposal Affects Your Credit
One of the most common questions people have about a consumer proposal is how they will affect their credit score and how long a consumer proposal will stay on their credit report.
It's important to remember that your credit score information is not impacted by the act of filing for a consumer proposal. Rather, it is affected by whether or not you make your payments on time and in full.
If you default on your payments, or if you miss any payments, this will have a negative impact on your credit score. However, as long as you make all of your payments on time and in full, your score will not be affected.
Consumer Proposal Credit Reporting In Canada (Transunion, Equifax)
Information on consumer proposals stay on your credit reports for three years. There are two main credit reporting agencies in Canada that can report on your consumer proposal: TransUnion and Equifax.
TransUnion credit score
TransUnion will report your consumer proposal information for a length of up to three years after it is filed. The company will also include a note on your report that says the proposal has been settled. This means that creditors will see that you're working to repay your debt, which can improve your chances of getting approved for a loan or line of credit in the future.
Equifax credit score
Equifax will remove consumer proposal information from your credit report three years after you’ve paid off all the debts according to the proposal, or six years from the date it was filed, whichever comes first.
How Long Do Consumer Proposals Stay on Your Credit Report in Canada?
The three-year mark has been set by Equifax and TransUnion for when a consumer proposal will be removed from your credit history after your last payment. That means the sooner you fulfill the expectations of the consumer offer and pay it off, the better your credit rating will recover. Plus, if you take steps to improve your credit during this time, you can help offset the effects of the consumer proposal.
Bankruptcy vs. Consumer Proposals: What's The Difference?
Bankruptcy and consumer proposals are two very different legal processes that can help you deal with unmanageable debt and will remain as negative credit information on your credit record for different lengths.
Bankruptcy is a legal process that allows you to have your debts forgiven, while a consumer proposal allows you to make monthly payments towards your debt over some time. A consumer proposal is a legal agreement set up between you and your creditors to pay off a portion of your debt or extend the time you have to pay it back.
Both options will affect your credit score long term, but a consumer proposal may be less damaging than bankruptcy. This is because a consumer proposal shows that you're making an effort to repay your debt, whereas bankruptcy indicates that you're unable to pay back what you owe. Generally speaking, a consumer proposal is a more common route to take when it comes to dealing with debt. In fact, it’s been noted that twice as many people choose consumer proposals over bankruptcy in Canada.
What to Do If You're Considering a Consumer Debt Proposal?
If you're struggling to make your monthly payments, and you're considering a consumer proposal, it's important to get a consultation with a Licensed Insolvency Trustee. They will be able to help you understand the process and determine if a consumer proposal is the right option for you.
You can find a Licensed Insolvency Trustee in Canada by using the Find a Trustee tool on the Canadian Association of Insolvency and Restructuring Professionals website.
It's also important to remember that a consumer proposal is a legal process, and it should not be taken lightly. So, make sure that you understand all of the implications before you make any decisions.
You may consider filing a consumer proposal if:
- You have more than $5,000 in debt.
- You're struggling to make your monthly payments.
- You're self-employed or own a business and can't afford to make your payments.
- You're in danger of having your money or assets seized by creditors.
How to Improve Credit After a Consumer Proposal
If you're looking to improve your credit report after a consumer proposal, there are a few things you can do:
- Make all of your payments on time.
- Keep your balances low.
- Use a mix of credit products. This means having a mix of installment loans (such as a mortgage or car loan) and revolving credit products (such as a credit card).
- Get a free credit report from Equifax, TransUnion, banks, or apps
- Check your credit reports for errors and dispute them if you find any.
- Consider using a credit monitoring service like Credit Karma to track your progress.
Can You Get a Loan While in a Consumer Proposal?
It's possible to get a loan while you're in a consumer proposal, but it will be more difficult than it would be if you didn't have it on your credit report.
Depending on the type of loan you wish to obtain, the lender may require that your consumer proposal be discharged before they approve the loan. You may also find it difficult to get approved for a loan with flexible terms. This is because lenders see consumers in a consumer proposal as high-risk borrowers.
If you're looking to get a loan while you're in a consumer proposal, it's important to know what you can and cannot be approved for. The type of loan you're looking for will play a role in the approval process.
For example, most lenders will not approve you for a mortgage while you're in a consumer proposal. However, some alternative lenders, like iCASH, may be willing to work with you. We offer short term loans in Canada up to $1,500 and accept all types of credit. So whether you have good, bad, or no credit at all, you can still apply.
At iCASH, we don't consider bad credit to be a deal-breaker. We understand that financial difficulties can happen to anyone. That's why we're here to help. If you need an instant loan and have bad credit, you may still be able to get the cash you need. We approve 9/10 applicants, so there's a good chance you can be approved for a small loan with us.