- Last updated: November 8, 2022
- Written by: Francisco Remolino
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Is it possible to recover from a consumer proposal in Canada by starting from scratch?You may find yourself in a better financial position after a consumer proposal than you would have been after filing for bankruptcy. However, a consumer proposal may remain on your credit record for up to six years after the date of filing – making you a less-than-desirable borrower in the eyes of creditors.Here are seven suggestions to assist you to get your borrowing ability back on track as quickly as possible.
Tips to Rebuild Credit After a Consumer Proposal
Keep Track of Your Credit Report
As soon as your consumer proposal is finalized, you must begin monitoring your credit report immediately. Make sure that no consumer proposal creditors are registered as active collection contractors.This is a common blunder made by people after consumer proposal proceedings, and it can have serious consequences, as it signals to potential new creditors that the debt has not been paid off and is still being pursued for collection – even though the debt has been settled, and the consumer is working to rebuild their credit.You should notify Remolino & Associates immediately if you discover an inaccuracy on your credit report; this mistake could be preventing you from reestablishing your credit history. It is possible to dispute information on your credit report by following a set procedure.
Pay Your Bills on Time
If you’ve been extending a loan or a line of credit, pay the money back on time each month.Long-term credit improvement comes from establishing and maintaining responsible financial practices, and this is the best way to avoid having to file for consumer proposals again in the future.
Get a Secured Credit Card
Signing up for a secured credit card is one of the simplest ways to restore credit and get a creditor who is most likely to approve you even after a consumer proposal.Since the amount you deposit determines your credit limit, obtaining a secured credit card has a low entrance barrier. Similar to an unsecured credit card, you make monthly payments on your secured card after charging purchases to it. The issuer of a secured credit card will use the deposit you make to cover any outstanding balances or missed payments.One advantage of a secured credit card is that your payment history can be shared directly with credit reporting agencies. If you keep this up for a long period of time, you should be able to upgrade to a standard unsecured credit card.
Contribute to a Registered Retirement Savings Plan
Put your money in a Registered Retirement Savings Plan (RRSP) when you have enough savings. An RRSP loan is available if you have a secured credit card and are already saving money.This loan will not only help your credit, but you will also get a tax refund for investing in it, so you won’t lose out. Having an RRSP shows a bank that you want to invest for the future, so opening one will only benefit your credit score.
Utilize a Credit-Building Program
Building credit via a loan or program is also possible – the goal of a credit builder loan is to improve one’s credit score over time, as opposed to the goal of a standard loan, which is to obtain a large sum of money and repay it.A credit builder loan entails the establishment of a savings account by the lender, the funding of which is tied to the reporting of payment history, to credit bureaus. Making these monthly payments on schedule throughout the loan period will help you establish a solid credit history when the time comes.Also, you get to keep the contributions you made, so that sum will add up to a healthy savings balance.
Create a Budgeting Plan
Set up a budget to help you see where your money is going and how much discretionary income you have each month.Keeping track of your spending and sticking to a budget every month takes discipline and consistency, but it ensures you don’t overextend yourself and can control your spending sufficiently to avoid rebuilding your credit again.
Establish Good Credit Habits
Some of the stages above already emphasize what are regarded to be excellent credit practices. But, to properly restore your credit, you must be able to combine them all.The habits include:
- Managing your debt-to-income ratio, which should be around 30%
- Find out your credit rating
- Help keep your money safe from fraud and theft of your identity
- Not using all of your available credit on your credit cards and other loans
- Put money into a fund for emergencies
- Check your credit report often
- Making payments on time
- Pay off your debts before taking on more
Protect Yourself From Credit Repair Scams
Many websites make bold promises about raising your credit score rapidly and easily, with little to no work from you, for a small charge.A claim like this should raise red flags right away, as the best method to improve your credit is to patiently and consistently make on-time payments, pay off your bills in whole, and keep your credit usage at around 30%.There are credit counseling businesses that will ostensibly negotiate with your creditors on your behalf to lower your interest rates and monthly payments. The only entity with the legal capacity to consolidate and reduce your debt through a consumer proposal is a professional insolvency trustee.In the same manner that you have to be wary of frauds entering a consumer proposal, you also have to be wary of those leaving one.
Remember: Pay Off Your Consumer Proposals Early
If you pay off your consumer proposal early, there will be no fees. All this does is get you out from under the effects of bad credit faster, and get you on the path to rebuilding your credit more efficiently.Even though a consumer proposal is a better option than bankruptcy, it still takes a long time to get your credit back to normal. The faster you can finish this process, the better off you’ll be, and your credit will be as good as new before you know it.When you need assistance in rebuilding credit and settling your consumer proposals, don’t hesitate to reach out to Remolino & Associates. Call us at (416) 792-5599 or book an online appointment today!
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