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How does a Consumer Proposal Affect My Credit Rating?

16 October 2023

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Consumer Proposals Affect Credit Rating

Key Points

A consumer proposal will indeed impact your credit rating, but not as severely as a Bankruptcy. While both choices can make it more challenging to secure credit, a Consumer Proposal remains on your record for just three years after your final payment.

How does a consumer proposal show up on my credit report?

When you file a consumer proposal, your credit report will reflect this 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. This note will specify the type of proceeding (a consumer proposal) and the filing date. Once you complete your proposal, this information is updated to include the completion date. We’ll explain below how long this notice stays on your report.

Second, 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 denotes a perfect credit rating, while an R9 represents bankruptcy. Therefore, a consumer proposal is generally seen as slightly better than bankruptcy. Typically, account information is removed from your credit report six years after the last activity date, which can be the last payment date or the filing date, depending on the creditor. In some cases, creditors may incorrectly label your account as ‘included in a bankruptcy,’ but the correct legal proceeding will appear in the public records or legal section.

How Does a Low Credit Score Affect Me?

Low credit can present unexpected challenges, as it categorizes you as a high-risk borrower. This high-risk status often leads to lenders rejecting your loan applications. When you do manage to secure credit, it tends to come with high-interest rates since lenders are hesitant to offer favorable rates to individuals with poor credit scores. Additionally, your credit history may even impact your job prospects, especially if potential employers request permission to review your credit background.

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

The duration for which a consumer proposal remains on your credit report in Canada has been updated by both TransUnion and Equifax, as of 2019. Here’s the latest information:

To simplify, under these new guidelines:

For those who opt for a lump sum proposal, the notice will typically be removed in approximately three years, contingent upon attending two counseling sessions to obtain your certificate of completion.

Choose Harris & Partners for Consumer Proposal Advice

Embarking on the path to financial recovery begins with your initial contact for debt help.

Dealing with debt complexities can be daunting, and determining if a consumer proposal aligns with your situation can be challenging. Therefore, it is strongly recommended to seek guidance from a licensed insolvency trustee.

For a consultation regarding consumer proposals in Canada, get in touch with one of our licensed insolvency trustees at Harris & Partners Inc. today by dialing 1-800-268-8093.