Life After A Consumer Proposal: Fastest Way To Build Credit

Life After A Consumer Proposal: Fastest Way To Build Credit

Written by Lisa Rennie
Fact-checked by Caitlin Wood
Last Updated November 22, 2022

While bankruptcy typically remains on a credit report for about seven years after the date of discharge, a consumer proposal remains on a credit report for three years after completion or 6 years after it was filed. As such, a consumer proposal might let you build a better credit score faster, depending on your exact situation and ability to pay your debts.

Regardless of the negative effect on your credit rating after a consumer proposal, it still offers you a fresh start with your finances and gives you the chance to begin the process of repairing your credit faster than bankruptcy

How To Build Good Credit After A Consumer Proposal

A consumer proposal can severely negatively affect your credit score, however, there are ways to rebuild your credit after a consumer proposal. By making smart financial choices and taking advantage of credit-building products and programs, you can slowly build good credit over time. 

Here are a few ways to build healthy credit after a consumer proposal.

Get A Secured Credit Card 

If you’ve recently gotten out of a consumer proposal, it can be nearly impossible to get approved for a conventional credit card. But getting a secured credit card is a lot easier, even after a consumer proposal, because you don’t need good credit or a high income.

All you need is a small deposit, which serves as your credit limit. You can then spend against your secured credit card, as long as you stay under your credit limit. Your timely repayments every billing period will be reported to the credit bureaus, which will help you gradually improve your credit score. 

Eventually, you should be able to get approved for a traditional unsecured credit card. 

Build A Positive Payment History

Your payment history plays the most important role in your credit score. A history of timely payments will help build very good credit, which is why it’s crucial that you meet all bill payment due dates every billing cycle. 

If you have access to credit products after a consumer proposal, use them responsibly to build a positive credit history. Plus, paying your bills on time helps to establish healthy financial habits. 

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Use A Savings Loan

While qualifying for a regular loan may not be possible after a consumer proposal, you could qualify for a savings loan. A savings loan is a unique type of financial product that is designed to help Canadians build good credit. 

With a savings loan, you won’t receive any money upfront. Instead, you’ll make payments to the lender who will report each one to the credit bureaus. After the loan term ends, you’ll have established a good credit history, as long as you’ve made all payments on time. 

Moreover, at the end of the loan term, the lender will give you back the installment payments you made minus interest and fees.

Get An RRSP Loan

After growing a savings account, you may want to consider investing in an RRSP. Your financial institution may consider giving you an RRSP loan after you’ve shown that you’re responsible enough to build savings and make timely payments with a secured credit card.

With an RRSP loan, you’ll have the opportunity to make even more on-time payments, which can go a long way in improving your credit score. In addition to building good credit, you can also repay most of the loan with the tax perks you can take advantage of by investing in your RRSP. 

How Long Will Your Consumer Proposal Stay On Your Credit Report?

If you file a consumer proposal, it will be noted on your credit report. More specifically, a consumer proposal filing will usually result in an R7 rating on your credit report. This will remain on your report for 6 years from the filing date, or 3 years from the day the consumer proposal is complete, whichever one comes first. 

How Long Does It Take To Rebuild Credit After A Consumer Proposal?

It will take at least 3 years or so to start rebuilding credit following the completion of a consumer proposal. As mentioned, a consumer proposal can remain on your credit report for at least 3 years or 6 years after filing the proposal.

You’ll likely need to wait until after your consumer proposal is complete before you can start rebuilding your credit. As long as you’ve got an R7 rating on your credit report, rebuilding your credit in full probably won’t be entirely possible. 

You can start making improvements in your financial life by developing good habits and using a secured credit card responsibly. But the proposal will need to be removed entirely from your credit report before you can fully repair your credit.

Can You Build Credit Faster By Paying My Consumer Proposal Early?

You can pay off your consumer proposal early without being subject to early repayment penalties. The benefit is that you can get rid of your debt sooner, and your credit report will be cleared of the consumer proposal information earlier. As such, you can start rebuilding your credit score faster.

This is a huge advantage and one that you should consider, especially if you’re financially able to repay the consumer proposal earlier. The sooner you can get your credit report cleared, the sooner you can start rebuilding your credit. Plus, you’ll be in a better position to secure more credit products in the near future.  

Keep in mind, however, that building good credit will still take a lot of time, so be patient while you work towards making better financial decisions. 

Can You Get A Car Loan After A Consumer Proposal

It’s possible to get a car loan after a consumer proposal, but it may require extra effort to get approved. In fact, it may even be possible to get a car loan while the consumer proposal is still in effect. There are auto dealerships and lenders who work specifically with Canadians who are under a consumer proposal or have just been discharged from one.

In order to get approved for an auto loan after a consumer proposal, you will need to have a steady job with a sufficient income, a low debt-to-income ratio, and evidence of timely consumer proposal payments. In addition, you will likely have to come up with a sizeable down payment to be used upfront to secure the loan.

Can You Get A Personal Loan After Consumer Proposal

Like car loans, it is also possible to get approved for a personal loan after you’ve had your consumer proposal discharged. The same factors apply in this case, such as an adequate income, low debt load, and proof of timely consumer proposal payments. That said, it’s likely that you will be charged a higher interest rate compared to loans given to those with a high credit score and no history of a consumer proposal.

Can You Get A Mortgage After A Consumer Proposal

Getting approved for a mortgage can be tough even if you have good credit and your credit report is clean. It can be a challenge to secure a home loan if your credit rating is poor. Ideally, your credit score should be above 680 in order to increase the odds of getting approved for a conventional mortgage. Your goal is to achieve at least that number in order to make it easier for you to secure a home loan.

That said, it is still possible to get approved for a mortgage even if your score falls below 680. There are several lenders out there who work exclusively with low-credit consumers. These alternative lenders will consider your home loan application as long as your previous debts have been cleared and you are making efforts to rebuild a positive credit rating.

Further, you should make every effort to save up for a hefty down payment amount. Lenders will want to see a large down payment in order to offset your low credit score. Ideally, at least 10% to 20% should be saved up in order to reduce the loan amount that you would have to take out and increase the odds of mortgage approval after a consumer proposal.

Loans After A Consumer Proposal FAQs

How does a consumer proposal hurt your credit?

Your credit score will be negatively impacted by a consumer proposal for at least 3 years, and up to 6 years after you’ve filed it. That’s because an “R7” rating will be noted on your credit report and will remain on your credit report for the indicated time. You’ll need to wait until this rating clears from your report before you can start fully repairing your credit score. 

What if there’s a mistake about my consumer proposal on my credit report?

Any errors on your credit report should be reported to the credit bureau immediately. The credit bureau will investigate the claim and correct the error if it is discovered.  You can also call the business that is reporting the incorrect information to the credit bureaus and have them rectify the mistake the next time they report. Either way, be sure to document the disputes in writing.  

Should I use a credit repair company?

If you have bad credit and don’t know how to go about improving your situation, a credit repair company may be able to provide you with the guidance needed to get back on the right path. But aside from financial education, the credit company won’t be able to do anymore to improve your credit than you can on your own.  Plus, there are credit repair scams out there to be wary of. Steer clear of any company that promises to repair your credit quickly and for a fee, as credit repair takes time. Don’t waste your money on firms that promise to do something that isn’t legally possible. 

Bottom Line

Your credit score will likely suffer after a consumer proposal, but that doesn’t mean that life after a consumer proposal has to be void of any future loans. While a consumer proposal might affect your credit rating for a few years, there’s no reason why you can’t improve your score by taking certain steps. With a good job and some self-discipline, you can gradually get your credit score back up to par, allowing you more freedom when it comes to taking out loans after a consumer proposal.


Rating of 4/5 based on 11 votes.

Lisa has been working as a personal finance writer for more than a decade, creating unique content that helps to educate Canadian consumers in the realms of real estate, mortgages, investing and financial health. For years, she held her real estate license in Toronto, Ontario before giving it up to pursue writing within this realm and related niches. Lisa is very serious about smart money management and helping others do the same.

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