Does A Consumer Proposal Affect My Credit Rating?

One of the most common questions we get about consumer proposal canada is “How will they affect my credit rating?” If you’re struggling with debt and are considering a consumer proposal as a way out, it’s important to know the full picture.

Well, you’ve landed in the right place.

Your credit rating is a big part of your financial identity, influencing everything from loan approvals to the interest rates you pay. So, it’s natural to wonder how a significant decision like a consumer proposal will affect this.

Whether you’re facing financial challenges or simply planning for the future, understanding these impacts is important. In this post, we’ll explore the effects of a consumer proposal on your credit rating, so you can make a confident decision about your finances.

Key Points

How does a consumer proposal show on my credit report?

A Consumer Proposal remains on your record for the sooner of three years after you complete the proposal payments or six years from the day you file. Put simply, a consumer proposal will impact your credit rating, but not as severely as bankruptcy. Let’s take a closer look.

Consumer Proposals, Public Record & Creditors

When you file a consumer proposal, it will show on your credit report in two ways. First, the Office of the Superintendent of Bankruptcy will notify the credit bureau about your consumer proposal, resulting in a note in the legal or public records section of your credit report.

Originally, it will only include the type of proceeding (in this case, a consumer proposal) and the filing date. Once you complete your proposal, the information will be updated to include the completion date.

Secondly, individual creditors will report that the account was ‘included in a proposal.’ This debt will be labeled as an R7, indicating that you’ve arranged to settle your debts with creditors. For reference, an R1 is a perfect credit rating, while an R9 represents bankruptcy. Therefore, a consumer proposal is generally seen as slightly better than bankruptcy.

Account information is typically removed from your credit report six years after the last activity date. This can be the last payment date or the filing date, depending on the creditor.

There is no restriction on getting new credit during a consumer proposal. In fact, we will help you get secured credit once your proposal is approved so that when you finish the program, you will have better credit than what you started with!

How Does a Low Credit Score Affect Me?

If you have a low credit score, you’ll be considered a high-risk borrower. This high-risk status often means lenders will reject your loan applications. If and when you do manage to borrow money, it will likely come with a high interest rate, to protect the lender’s investment. This makes it even more important to keep on top of your repayments.

How Long Does it Take to Improve Credit After a Consumer Proposal?

Bouncing back from a consumer proposal can feel like a fresh start, and you’re probably eager to see your credit score climb. In as little as 2 to 3 years, you can start noticing improvements in your score.

The key is to start building good credit habits right away. Things like paying any new bills on time, keeping your credit balances low, and using a secured credit card responsibly can all help. Remember, rebuilding credit is a journey, and every positive step counts towards a brighter financial future!

How long does consumer proposal stay on credit report in Canada?

The amount of time a consumer proposal stays on your credit report in Canada varies across different credit monitoring agencies. In 2019, TransUnion and Equifax updated their terms:

TransUnion removes the consumer proposal from your credit file three years from the date you completed the proposal OR six years from the date you defaulted on the account, whichever comes first.
Equifax specifies that a consumer proposal will be taken off your Equifax credit report three years after you’ve paid off all the debts as per the proposal, or six years from the date it was filed, depending on which comes first.

If you choose a lump sum proposal, the notice will typically be removed in roughly three years, as long as you attend two credit counseling sessions.

Will a consumer proposal affect my credit score?

Filing a consumer proposal does technically affect your credit score, but only for a few years.

Instead of damaging your credit score permanently, it results in a short period where your score drops while the debt is being dealt with.

Here’s how it works:

When you file for a consumer proposal Canada, the two major credit bureaus, Equifax and TransUnion, mark your credit report with an “R7 rating.”

This tells lenders you’re formally repaying your debt. This rating will stay on your file for a limited time, and while it does, your credit score will decrease.

However, three years after your debt is settled or six years after you filed the consumer proposal (whichever comes first), the R7 rating is removed, and you can rebuild your credit score.

In fact, you can start rebuilding your credit score before then by making on-time payments on your consumer proposal and keeping your balance low on any credit cards.

For example, if you file a consumer proposal in 2025 and complete it in 2027, the record will be automatically removed from your credit report by 2030 at the latest, and possibly sooner if you complete it ahead of schedule.

Did you know? Consumer proposals made up 80% of the consumer insolvency filings in September 2025.

How much does a consumer proposal lower your credit score?

The amount a consumer proposal Canada lowers your credit score depends on your financial history.

On average, Canadians see a temporary reduction of 100 to 200 points after filing.

Your payment history represents the largest part of your credit score (about 35%), so any insolvency filing carries weight.

When a consumer proposal is recorded on your report, the scoring system updates this section to show that past debts weren’t paid as originally agreed.

That update signals a higher risk to lenders, which is why the score drops at first.

However, if your credit was already damaged by missed payments, defaults, or maxed-out balances, a consumer proposal might actually help stabilize and improve your credit faster than continuing to struggle with overdue debt.

Consumer proposal vs. Bankruptcy: What’s the difference on your credit score?

While both a consumer proposal and bankruptcy affect your credit, the impact of each is very different.

	Consumer Proposal	Bankruptcy
Credit rating	R7: Causes a moderate short-term drop in credit score.	R9: Causes a deeper and longer-lasting drop in credit score.
Duration on credit report	3 years after completion OR 6 years from filing	6–7 years after discharge or 14 years for a second+ filing
Assets	You keep your assets (e.g., home, car, RRSPs)	You may have to surrender certain assets (e.g. equity on home or vehicle)
Future credit access	Easier to rebuild within 1–2 years	More difficult; lenders may require longer recovery period
Lender perception	Seen as responsible debt resolution	Viewed as a last resort

In short, while a consumer proposal temporarily lowers your credit score, it also shows creditors that you made an honest effort to repay part of your debt rather than walk away from it completely.

That effort matters to lenders and helps you be seen as more creditworthy than bankruptcy would.

Rising debt and credit worries weighing you down? Take a moment to speak with one of our Licensed Insolvency Trustees for expert advice on what to do next.

Call free on 800-268-8093 or leave your details with us and we’ll be in touch.

How to rebuild credit after a consumer proposal

Once you’ve filed a consumer proposal in Canada, you can start rebuilding your credit almost right away.

Here are the best ways to rebuild your credit in Canada after completing (and even during) a consumer proposal:

1. Make every consumer proposal payment on time

Your Licensed Insolvency Trustee (LIT) will work with you to manage your monthly proposal payments, but completing them on time is in your hands.

Each payment you make helps establish a record of consistency, which is the single most important factor when improving your credit score.

On the other hand, missing payments can cause your proposal to be canceled and your credit score to decline even further.

2. Apply for a secured credit card

A secured credit card is one of the best ways to begin rebuilding credit in Canada.

You provide a small security deposit (between $300 and $1,000) to a lender who will issue a credit limit equal to that amount.

All you have to do is make small purchases and pay off the balance in full each month to demonstrate you’re a responsible borrower.

Over time, this will help re-establish your credit history.

3. Keep your credit utilization low

When using credit, try not to exceed 30% of your available limit.

Using too much of your credit limit suggests to lenders that there is pressure on your finances, making them more cautious, even if every payment is made on time.

Keep your balance well below your limit to show you’re in good control of your credit.

Secured card limit	Suggested maximum balance (30%)
$300	$90
$500	$150
$750	$225
$1,000	$300

4. Monitor your credit report regularly

Keep an eye on your credit report with both credit bureaus (Equifax and TransUnion) at least twice a year.

Make sure the accounts included in your consumer proposal are properly marked—i.e., “included in proposal” or “settled.”

Once you’ve finished your proposal, confirm your R7 rating will be removed within the expected time frame discussed with your LIT.

You can request your full credit report for free from both bureaus. Reviewing it directly (rather than relying on third-party apps like Credit Karma or ClearScore) gives you the most accurate picture of what lenders see.

If you spot any errors, like accounts still showing as active or overdue, you can raise a dispute to have the entry corrected.

5. Avoid excessive credit applications

Applying for too many new accounts at once can hurt your credit score. Focus on rebuilding gradually with a secured credit card, a small line of credit, or a car loan once your proposal is completed.

Each application creates a ‘hard inquiry’ on your file—an entry on your credit file that can lower your score slightly.

Several applications in a short period can suggest to lenders that you’re not in control of your finances.

How do I access credit after a consumer proposal?

Once you’ve finished your consumer proposal, you’ll gradually get back access to new credit products.

Lenders will look for consistent income, stable payment history, and a manageable level of debt before approving new applications.

Here’s what to expect:

Credit Cards: You can usually qualify for an unsecured credit card within 1–2 years of completing your proposal, especially if you’ve maintained a secured card responsibly over that time.
Car Loans: Many lenders and credit unions work with clients who have recently completed proposals, offering reasonable rates for reliable repayment records.
Mortgages: Within two to three years, many Canadians can qualify for a mortgage again—especially with a strong down payment between 10% and 20% or more

Take The First Step With Harris & Partners

Dealing with debt is a journey that’s different for everyone. We understand that it’s not easy, and that’s why our Licensed Insolvency Trustees are here to help.

Our team at Harris & Partners offers free, non-judgmental advice to guide you through these challenging times. Feel free to reach out to us for support and advice as you navigate your financial path to recovery. You’re not alone in this – let’s find a debt solution or consumer proposal Canada that works for you.

Choose Harris & Partners for Consumer Proposal Advice

We know that dealing with debt can be daunting. But the path to your financial recovery begins with asking for help.

Figuring out if a consumer proposal is the right choice for you is a big decision, and it’s not one you have to make alone. Our Licensed Insolvency Trustees are here to help you find the best debt solution for your specific situation.

For a free and confidential chat about consumer proposals and your other debt help options, give our friendly team a call today.