Do you know what your credit report looks like? Many Canadians don’t know what’s on theirs until they have a loan application rejected. But you can look up your report for free. If you’re concerned about your debt, it’s worth taking a look. There are actions you can take to improve your credit report.
A consumer proposal will appear on your credit report and affect your score negatively – but only temporarily. After a consumer proposal, taking steps to actively improve your standing with lenders will help you qualify for loans, credit cards, mortgages, and leases in the future. When you book a free consultation at G. Slocombe & Associates, a licensed insolvency trustee makes sure you know about all of your options and that you get the full picture. They will walk you through the full ramifications of debt relief, including the advantages and drawbacks of different options.
Which Information Is on Your Credit Report?
Your credit report is a summary of your borrowing history. Although it is often evaluated alongside your credit score, it provides lenders with a more detailed history of each of your accounts. According to Equifax, this is the information in your credit report.
#1 Personal Information
This includes identification such as your name, address, date of birth, Social Insurance Number, and potentially employment information.
#2 Credit Accounts
Also known as tradelines, this is a list of all the credit accounts you have established with lenders. This includes every credit card you have, lines of credit, payday lenders, mortgage lender, auto loan, etc. Utilities can also appear as tradelines if you do not pay them in time. Your report includes information about the date you opened the account, your credit limit, account balance, and payment history.
#3 Inquiry Information
Every time someone inquires about your credit report, that also gets reported. Only hard inquiries, which occur when a potential lender pulls your report, show up. They remain for 36 months and can bring your credit score down. Lenders can see if you’ve recently been rejected for another loan.
#4 Collections Information
This includes information from the public court, such as accounts going to collections, bankruptcies, or consumer proposals.
In Canada, this history is maintained by two agencies: Equifax and TransUnion. You can request your credit report for free by mail, phone, or fax from these companies or pay a fee to receive it by email.
How Do Consumer Proposals Affect Credit?
Consumer proposals are recorded on your credit report. Most lenders will not issue new credit to someone who has filed for bankruptcy or a consumer proposal. In bankruptcy, your existing credit cards will also be frozen, even if you have a zero balance on them, although in a consumer proposal, you may be able to keep them.
While a consumer proposal can complicate new credit, if you are already deeply in debt, qualifying for a new loan will be equally difficult. In addition, our consumer proposal services on Vancouver Island include credit counselling advice to help you start over and restore your credit. This includes money management, budgeting, and identifying financial warning signs. There are simple actions that can help you restore your trustworthiness to creditors and qualify for loans again.
How Long Does a Consumer Proposal Stay on a Credit Report in BC?
A consumer proposal will be visible on your credit report for three years after the date of the discharge. Consumer proposals can last up to five years, meaning it will remain for a possible total of eight years. This may seem like a long time, but consider what could happen if you don’t get a consumer proposal.
Missing payments can be just as bad for your credit as a consumer proposal – or even worse. When you are delinquent on a payment, the creditor can assign it to a debt collection agency. Debts sent to collections appear on your credit report for six years and will also affect your ability to qualify for new loans or better interest rates.
One of the many advantages of a consumer proposal is that it stops collection actions and gives you a clear timeline for debt freedom. If you tried to pay everything back on your own, you could go three years without missing a payment. But if you lost income and your phone bill went to collections, that would be another six years of negative information on your report. When you enter a consumer proposal in BC, you gain a greater degree of certainty and a chance to start over.
How Does Bad Credit Affect You?
Now you know that your credit will take a temporary hit if you use a consumer proposal, but how will that affect you?
- You likely won’t be able to qualify for new loans, lines of credits, or credit cards until after the consumer proposal is dropped from your report.
- With a lower credit score in general, you won’t qualify for the preferential interest rates that those with good scores can receive, as they are seen as lower-risk borrowers.
- It may impact your job prospects, especially in finance and government. However, most jobs do not run credit checks, and employers can only do so with your permission.
Remember, missing or making late payments or having debts sent to collections will also have a highly negative impact on your credit. A consumer proposal’s effects are temporary, and it provides you with a clear path toward debt freedom. As far as alternative options to bankruptcy go, a consumer proposal can be one of the smartest options for those earning a steady income.
A consumer proposal provides a clear path out of debt. It does not come without drawbacks, but they typically outweigh the downside, especially if you already have debts that have been sent to collections. You can stop the collection calls and receive debt forgiveness. Talk to us about a consumer proposal on Vancouver Island today.