Consumer Proposal and Your Credit Rating (2024)

How Does A Consumer Proposal Affect Your Credit Rating?

Deciding to file a consumer proposal is about dealing with your debt, but we understand that you may be concerned about the impact a consumer proposal has on your credit report. The good news is that recovering from debt after a consumer proposal or bankruptcy is entirely possible.

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

A reference to the fact that you filed a consumer proposal will appear in two different sections of your credit report.

First, the Office of the Superintendent of Bankruptcy will send information to the credit bureau notifying them that you filed a consumer proposal. A note will appear in the legal or public records section of your credit report identifying the type of proceeding (in this case a consumer proposal) and the date you filed. When you complete your proposal, this information is updated with the completion date. We explain below how long this notice will remain on your report.

Second, each individual creditor will report that the account was ‘included in a proposal’. The debt will be coded as an R7 which means you have entered into an arrangement to settle your debts with your creditors. A perfect credit rating is an R1, and bankruptcy is an R9, so a proposal is sometimes viewed as slightly better than a bankruptcy. Account information is generally purged from your credit report six years after the last activity date. That may be the last date of payment or the date of filing, depending on the creditor. Occasionally, creditors will incorrectly report your account as ‘included in a bankruptcy’. The proper legal proceeding will appear in the public records or legal section.

How long will a consumer proposal notice remain on my credit report?

Both TransUnion and Equifax have updated their retention policy regarding consumer proposals. Below is the most current data, as of 2019, from their websites:

TransUnionreports that

  • The consumer proposal and all accounts reported as satisfied through the proposal will be removed from your file three (3) years from the date you satisfied the proposal or six (6) years after the date you defaulted on the account, whichever date comes first.

For more information on how long TransUnion keeps information on file seehere.

Equifaxstates that:

  • A consumer proposal will be removed from your Equifax credit report 3years after you’ve paid off all the debts according to the proposal, or 6 years from the date it was filed, whichever comes first.

More information about retention periods for Equifax can be foundhere.

What does this mean?

The longest a consumer proposal will now remain on your credit report is 6 years from the date you file based on these new guidelines.

  • If you complete your consumer proposal payments in five years, the notice will be removed one year later (that is, six years from the date you filed).
  • If you complete your payments in two years, the notice will be removed five years from the date you filed.
  • If you complete a lump sum proposal, the notice will be removed in roughly three years (you will need to attend two counselling sessions to receive your certificate of completion).

Consumer Proposal and Your Credit Rating (1)

Read Transcript

In 2019, the credit bureaus in Canada shortened how long they retain information regarding a consumer proposal.

How long will a consumer proposal last on my credit report? New rules!

Hi, I’m Doug Hoyes, a Licensed Insolvency Trustee with Hoyes Michalos & Associates. Today I’m going to explain these new rules around how a consumer proposal affects your credit report and how long before that information is removed.

A consumer proposal is a program filed with a licensed insolvency trustee to settle your debts for a percentage of what you owe and pay that settlement period over a period of time. The good news is you can often reduce your debt by up to 70%. Because you entered into a repayment plan, this will appear in two different sections of your credit report; the legal or public record section and the individual account section. The legal section is updated by the Office of the Superintendent of Bankruptcy or the OSB. When you file a proposal, the OSB will send information to the credit bureaus stating that the proceeding you filed was a consumer proposal and the date you filed. When you complete your proposal the OSB will send updated information with the date you receive your certificate of full performance. Every credit report also contains a Trade Account section. This is a list of all the debts reported by your creditors and monthly transaction information like your current balance, the date of last payment and if you’re behind on payments. If you file a consumer proposal, your creditors will report to the credit bureau that your debt was included in a proposal. Sometimes the creditors may make a mistake. They may say the debt was included in a bankruptcy. You can apply to the credit bureau to have this fixed, but you can also point anyone to the legal section which always shows the correct proceeding.

So, when is this information removed? Old rules said this was removed three years after completing the proposal. This is no longer accurate. TransUnion now says they will remove all of this information, both the proposal and accounts in your Trade Section three years from the date of completion or six years from default, whichever comes earlier. The default date is the day you filed. Equifax rules are similar.

Why is this change important? Two reasons; first, the maximum time a proposal will now impact your credit report is six years from the date you file. Second, consumer proposals are for a maximum of five years. That means that if you take the full five years to complete your proposal, the proposal and all of the debts will be removed just one year after you complete your payments. It’s also important to know that you don’t have to wait to start rebuilding your credit. It’s possible to get a secured and sometimes unsecured credit card during your proposal. This means you can start the process of rebuilding a better credit history right away, free from your old debt.

For more information on how these new rules work, visit and search consumer proposal credit rating.

Close Transcript

The more important question may not be what is your credit rating after your consumer proposal but rather how is your financial condition today? If you are missing payments or do not have access to further credit due to carrying too much debt, then the sooner your deal with that debt, the sooner you can begin the debt recovery process.

Rebuilding Your Credit After a Proposal

Your proposal is how you eliminate your debt so you can begin the process of building a new, and better, credit history. Improving your credit score after a consumer proposal involves:

  1. Monitoring your credit report for errors and omissions and sending the necessary documentation to the credit bureau to have any mistakes corrected
  2. Consider applying for a secured credit card to re-establish a pattern of repayment.
  3. Keeping all bill payments current. We strongly recommend that you pay all credit card balances in full each month.

Mortgages after proposal

If you have an existing mortgage, your lender will generally renew your mortgage even during your proposal as long as you have kept current on your mortgage payments.

Rebuilding your credit for a mortgage, if that is your goal, usually requires something called the two plus two plus two rule. While this is an unofficial rule, generally you will need:

  • two credit facilities (any combination of credit cards, car loan or other loan)
  • if a credit card, it should have a $3,000 credit limit
  • you will need to demonstrate two years of good payment history.

Please keep in mind, you only need this level of credit if you are looking for a mortgage or other large loan. Otherwise, keep your credit card limits well within your ability to pay off each month.

It is possible to get credit after a bankruptcy or consumer proposal. Our Free Online Video Course on Rebuilding Credit outlines what lenders are looking for and the steps you can take to rebuild credit.

Enroll for Free

Financial Debt Recovery Process

Getting started on the road to financial recovery means making the first call for debt help.

Understand more about how a consumer proposal is the first step in improving your credit by reading our article A Clean Credit Report Does Not Equal A Good Credit Report.

If you are struggling with too much debt, call us today at 1-866-747-0660 or email us for a free debt evaluation. We can help you eliminate your debt so you can begin to build a new life and a new credit history.

Consumer Proposal and Your Credit Rating (2024)


Consumer Proposal and Your Credit Rating? ›

And, yes, filing a consumer proposal will affect your credit rating – but there's more to the story. If you file a consumer proposal, your credit score will be negatively affected, just as it would be if you simply ceased to make your payments.

How badly does a consumer proposal affect your credit score? ›

A consumer proposal will affect your credit rating, but less drastically than a Bankruptcy. While both options make it less likely that you will be able to obtain credit a Consumer Proposal will only stay on your record for three years after your last payment.

Do creditors usually accept consumer proposal? ›

Consumer proposals are usually accepted as filed and negotiations can take place between you and your creditors with the help of your Licensed Insolvency Trustee to gain a positive vote.

How to get consumer proposal off credit report? ›

Consumer proposals

Equifax and TransUnion remove a consumer proposal from your credit report either: 3 years after you pay off all the debts included in the proposal, or. 6 years after you sign the proposal (whichever is sooner)

What is the downside of a consumer proposal? ›

Disadvantages of a Consumer Proposal:

A proposal will usually take longer to complete than a bankruptcy. Lowering your monthly payment means longer time paying back, however, if your situation improves, you CAN pay off a proposal early. Credit rating is still affected – A Consumer Proposal DOES affect your credit.

How long does it take to improve credit score after consumer proposal? ›

Improving your credit score after a Consumer Proposal or personal bankruptcy is easier than you might think. In as little as two to three years you may even have a better credit rating than before you started – and you can get a new mortgage, vehicle financing, credit card, bank loan, etc.! Let us explain…

How bad is an R7 credit rating? ›

Debts in a consumer proposal are coded as R7 on a credit report, meaning you've agreed to settle them with your creditors. For some perspective, a rating of R1 is considered to be perfect credit, while bankruptcy is recorded as R9. R9 is essentially the lowest rating someone can have.

Do you have to give up credit cards with consumer proposal? ›

With a consumer proposal, it is also possible to keep any credit cards with a nil balance, but you may want to have a fresh start. You may also want to consider having some credit counselling sessions to ensure you are well placed for managing your credit with a secured credit card.

Do you have to give up all credit cards in consumer proposal? ›

When you file for a consumer proposal, you will have to hand in any credit cards that are part of the proposal. The creditors will freeze or close the credit card for which you previously qualified. You might have a credit card with a zero balance or a credit balance not included in the proposal.

Do banks accept consumer proposals? ›

They can say 'yes' or 'no' to the proposal. If at least half of your creditors vote 'yes,' then the proposal is deemed approved. Banks have 45 days from the date you file the proposal to vote. Banks also have the option to ask for a certain amount of the debt owed to them.

Is it smart to do a consumer proposal? ›

A consumer proposal filing makes good sense if you have a large amount of unsecured debt and a stable monthly income. If you can still repay at least 25% of your total debt over a five-year period, it's likely that creditors will accept a consumer proposal to avoid losing the entire loan balance in a bankruptcy.

How can I build credit fast after consumer proposal? ›

In order to rebuild your credit after a bankruptcy or a consumer proposal, it's vital that you start establishing a reliable payment history. That means paying all bills on time, including your credit card, utilities, cell phone, etc.

Can creditors reject a consumer proposal? ›

Creditors sometimes reject consumer proposal offers. Your offer may be too low and your debt too high for them to think your offer is good. When you file your proposal it is very important you understand who your creditors are and how they typically vote.

What is the success rate of a consumer proposal? ›

With a 99% acceptance rate on any consumer proposals we file, we see many Canadians reducing their debt by up to 80% with a consumer proposal. This means that when you file with Spergel, you have a 99% chance of reducing your debt by 80%.

Does income affect consumer proposal? ›

In consumer proposals, the amount you need to pay in surplus income will only be calculated at the beginning of the proposal and will remain fixed throughout the duration of it. If your income goes up or down during the proposal, the allocation does not change.

Can I keep my savings on a consumer proposal? ›

Only when you file bankruptcy would any contributions made in the past twelve months need to be surrendered to a Licensed Insolvency Trustee. A consumer proposal also allows you to keep any savings, RESPs, and other investments you may have contributed to.

How can I rebuild my credit fast after consumer proposal? ›

7 Tips to Rebuilding Credit Following a Consumer Proposal
  1. Monitor your Credit Report.
  2. Make On-Time Payments.
  3. Apply for a Secured Credit Card.
  4. Take Out an RRSP.
  5. Use a Credit Building Program.
  6. Set a Budget.
  7. Develop Healthy Credit Habits.
  8. Beware of Credit Repair Scams.
Feb 16, 2022

Do you lose your credit cards after a consumer proposal? ›

Credit Cards & Consumer Proposals

The only catch is that the card must have no balance at the time of filing. Since consumer proposals are different from bankruptcy, you can still opt to keep the card to give yourself the option of using it in the future.

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