How Will a Consumer Proposal Affect My Credit?

How Will a Consumer Proposal Affect My Credit?

Written by Caitlin Wood
Last Updated June 8, 2021

Filing a consumer proposal will damage your credit rating and financial health; there is no way around it. Anything other than on time regular payments towards your credit accounts will negatively affect your credit rating and result in a black mark on your credit report. Potential new creditors or lenders will be able to see these black marks which will affect whether or not they approve you.

While this may seem extreme, a consumer proposal administrator will not allow those who do not need the help of a consumer proposal to file. More often than not, the impact on your credit rating is out weighted by the benefits that you’ll experience.

Looking for information on consumer proposals? Watch this video.

North American Standard Account Ratings

Your Canadian credit score, the credit ranking you’re probably the most familiar with, is a 3 digit number that represents the health of your borrowing habits and overall financial life. Each of your individual credit accounts is also given another type of credit rating, represented by a letter (R, O or I) and a number (1-8).


R= Revolving credit, a credit card is an example of revolving debt.

O= Open ended credit account, a line of credit is an example of open credit.

I= Installment credit, a car loan is an example of installment credit.


1= Your loan payments are on time.

2= Your loan payments are 30 days late.

3= Your loan payments are 60 days late.

4= Your loan payments are 90 days late.

5= Your loan payments are 120 days late.

6= This number is usually not used.

7= Your credit account is part of a consumer proposal.

8= This means a secured creditor is taking action to repossess the asset that was used as security. This rating rarely appears on credit reports.

9= You are in bankruptcy.

Confused about the difference between a consumer proposal and a debt management program?

Your Credit Rating After Filing a Consumer Proposal

Each of your credit accounts that are included within your consumer proposal will be given one of the worst credit ratings, an R-7. As soon as your consumer proposal administrator files your proposal and it is accepted the credit ratings of those accounts included will change to an R-7.

Once you’ve completed your consumer proposal, meaning you’ve finished making your payments, a note indicating that you’ve filed a consumer proposal will remain on your credit report for 3 more years. This means that a consumer proposal can negatively affect your credit and financial life for up to 8 years, depending on how long you make payments for (typically you have a maximum of 5 years to complete a consumer proposal).

Should You Worry?

One of the most frequently asked questions that we get, concerning consumer proposals and credit ratings, is whether or not you should worry about how your rating is affected. Unfortunately, there isn’t a straight forward answer to this. Technically, the answer is yes as you should always be worried about how your financial decisions affect your credit rating. But, we don’t want that to stop you from filing for a consumer proposal when it’s the right decision.

Marble Financial
Want to pay off your consumer proposal and start building credit faster?

Getting The Help You Need

If filing a consumer proposal is on your mind then you’re more than likely dealing with some serious financial issues. Getting the help you need to deal with or fix these issues should be your number one goal, even if that means filing a consumer proposal and negatively affecting your credit rating for several years. In most cases, getting the help you need to get back on track is worth the low credit ratings.

Dealing With Your Debt

Debt can and will affect all aspects of your life. Taking the necessary steps to deal with it is always the best choice, even if that means filing a consumer proposal. Having a plan in place to get your debt under control and finances back on track will, in the end, be worth it.

Seek The Help of an Expert

If your still worried that a consumer proposal is not the best option for your situation (when is a consumer proposal the right choice?) or are concern about the affect it will have on your credit rating, you should seek the expert advice of a professional. In Canada a consumer proposal must be filed by a Licensed Insolvency Trustee therefore it’s in your best interest to contact a trustee to set up an initial meeting to discuss your options.

Rating of 4/5 based on 8 votes.

Caitlin is a graduate of Dawson College and Concordia University and has been working in the personal finance industry for over eight years. She believes that education and knowledge are the two most important factors in the creation of healthy financial habits. She also believes that openly discussing money and credit, and the responsibilities that come with them can lead to better decisions and a greater sense of financial security. One of the main ways she’s built good financial habits is by budgeting and tracking her spending through the YNAB budgeting app. She also automates her savings so she never forgets to put aside a portion of her income into her TFSA. She believes investing and passive income is key to earning financial freedom. She also uses her Aeroplan TD credit card to collect Aeroplan points so that she can save money when she travels.

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