How Long Do Consumer Proposals Affect Your Credit?

Dealing with debt can be tough, and it’s okay to feel a bit overwhelmed. If you’re considering a consumer proposal, or have already taken that step, it’s important to understand how it affects your credit.

At Harris & Partners, we’re here to walk you through this journey and arm you with all the information you need to make confident financial decisions. Let’s break down what a consumer proposal means for your credit report, and get you on your way to a stable future.

Key Takeaways

The Impact on Your Credit Report
How Long Does it Stay on Your Credit Report?
Why Choose a Consumer Proposal?
What Should I Expect From a Consumer Proposal Process?

When you file a consumer proposal Canada, it shows up in two places on your credit report:

In the Big Picture (Legal or Public Records Section): Think of this as the headline news on your report. The credit bureau gets a note about your consumer proposal – when you filed it and when you complete it. This is just a brief mention, but it’s there for anyone looking into your credit history to see.
The Details (Credit Accounts Reporting): Each of your creditors will mark your account as ‘included in a proposal’, with an R7 rating. It’s not perfect (that’s R1), but it’s not as severe as bankruptcy (R9).

How Long Does it Stay on Your Credit Report?

As of 2019, here’s how the big credit bureaus, TransUnion and Equifax, handle your consumer proposal:

TransUnion’s Policy: Your consumer proposal will leave your report three years after you’ve paid it off, or six years after you first missed a payment – whichever happens first.
Equifax’s Take: They’ll remove the proposal from your report three years post-payment or six years from when you filed, depending on which comes first.

Why Choose a Consumer Proposal?

Deciding to go for a consumer proposal can be a smart move when you’re navigating through tough financial waters. Let’s talk about why it might be a good choice for you:

A Lighter Debt Load: Pay off just a part of your debt, not the whole mountain. This means you can breathe a bit easier, knowing you’re handling what you can afford.
No More Harassing Calls: Once you file a consumer proposal, those stressful calls and letters from creditors stop.
Keeping Your Assets: Unlike bankruptcy, a consumer proposal often allows you to keep your assets – like your home or car.
A Single Monthly Payment: Instead of juggling multiple bills, you make one manageable monthly payment.
A Fresh Financial Start: Completing a consumer proposal is a step towards rebuilding your credit and financial stability. It’s not an overnight fix, but it’s a significant stride towards a brighter financial future.

What Should I Expect From a Consumer Proposal Process?

We understand if you’re feeling confused about the consumer proposal process, but we’ll be here to support you every step of the way. From your initial consultation to filing the documentation and negotiating with your creditors, you can count on our Licenced Insolvency Trustees to be there. Check out our short video below to see exactly what you can expect:

A consumer proposal does lower your credit score, but it doesn’t ruin it.

The ‘R7’ rating that comes with filing for a consumer proposal is temporary, and once completed, you can rebuild your credit with steady payments and responsible use of new credit products.

If you’re looking into consumer proposals as a way to settle your debt, your first question might be whether or not it also affects your credit score.

In fact, this is a very common question for our Licensed Insolvency Trustees.

In this blog post, we’re going to take a look at whether consumer proposals affect your credit score, by how much, and how to rebuild it once your debt is settled.

Jump to:

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.