Building credit after a consumer proposal in Ontario

Consumer proposals can provide a lifeline for individuals struggling with unmanageable debt. However, they also pose a significant challenge to your credit standing. This guide aims to provide practical advice for individuals looking to rebuild their financial reputation after filing a consumer proposal in Ontario.

Understanding Consumer Proposals

A consumer proposal is a legal process in which individuals negotiate with their creditors to pay back a portion of their debts over a specified period. This procedure offers an effective alternative to bankruptcy, allowing debtors to retain their assets while making manageable payments.

In Ontario, only a licensed insolvency trustee can file a consumer proposal. The trustee will review your financial situation, propose a repayment plan to your creditors, and manage the payments once the proposal is accepted.

Credit Impact of a Consumer Proposal

A consumer proposal has a significant impact on your credit score. In Canada, the credit bureaus assign it an R7 rating, which indicates a special arrangement to repay your debts. This rating will remain on your credit report for three years after completing the proposal or six years from the date you filed, whichever comes first.

This negative credit information can make it challenging to secure loans or credit cards. Despite this, a consumer proposal offers a fresh start, allowing individuals to regain control over their finances and begin rebuilding their credit.

Steps to Rebuild Credit After a Consumer Proposal

Rebuilding credit after a consumer proposal in Ontario is a gradual process that requires discipline and patience. Here are some steps that can help accelerate this journey:

  1. Complete Your Consumer Proposal: The first step in credit rebuilding is to complete your consumer proposal as soon as possible. An early completion means the R7 rating will be removed from your credit report sooner.
  2. Check Your Credit Report: Regularly review your credit report to ensure that all information is accurate. Report any errors to the credit bureau promptly for rectification.
  3. Establish a Budget: A well-planned budget can help you manage your finances effectively, enabling you to meet all your bill payment due dates and avoid falling back into debt.
  4. Save Regularly: Building a savings habit shows financial institutions that you are financially responsible, enhancing your creditworthiness.

Credit Building Strategies

Several strategies can help rebuild your credit after a consumer proposal:

Secured Credit Cards

Secured credit cards are a useful tool for building credit. They require a deposit, which will serve as your credit limit. Timely repayments will be reported to the credit bureaus, slowly improving your credit score.

Savings Loans

Savings loans are unique financial products designed for credit-building. Instead of receiving money upfront, you make payments to the lender, who reports them to the credit bureaus. At the end of the loan term, you receive your payments back, less any interest and fees.

RRSP Loans

After building a savings account, consider investing in a Registered Retirement Savings Plan (RRSP). Some financial institutions may offer you an RRSP loan after demonstrating financial responsibility.

Securing Loans After a Consumer Proposal

Securing loans after a consumer proposal can be challenging but not impossible. Here are some possibilities:

Car Loans

There are auto dealerships and lenders who work specifically with individuals under a consumer proposal. Approval would typically require steady employment, sufficient income, a low debt-to-income ratio, and evidence of timely consumer proposal payments.

Personal Loans

Similar to car loans, it’s possible to secure a personal loan after a consumer proposal. However, the interest rate may be higher than standard loans.


Securing a mortgage after a consumer proposal is challenging but feasible. Lenders will consider your application provided previous debts have been cleared and you are making efforts to build a positive credit rating. A large down payment can also increase your chances of approval.

Mortgages and Consumer Proposals

A consumer proposal can impact your ability to secure a mortgage. Most lenders prefer your credit score to be above 680. However, some alternative lenders may consider lower scores, provided you demonstrate financial responsibility and make a significant down payment.

Common Questions About Building Credit After a Consumer Proposal

How long does a consumer proposal stay on your credit report?

In Ontario, a consumer proposal stays on your credit report for three years after completion or six years from the date of filing, whichever comes first.

Can I increase my credit score during a consumer proposal?

Yes, you can start rebuilding your credit score during a consumer proposal. However, the full repair of your credit will only occur once the consumer proposal is removed from your credit report.

Can I get a loan during a consumer proposal?

Yes, it’s possible to secure a loan during a consumer proposal, although it’s often more challenging and may come with higher interest rates.

Avoiding Future Financial Pitfalls

Building credit after a consumer proposal in Ontario is not just about improving your credit score. It’s also about developing sound financial habits to avoid future debt issues. Here are some tips:

  1. Live Within Your Means: Avoid unnecessary expenses and prioritize needs over wants.
  2. Create an Emergency Fund: Establish a savings account for unexpected expenses to avoid relying on credit in emergencies.
  3. Pay Bills on Time: Timely bill payments will help build a positive payment history, a key factor in credit scores.


Rebuilding credit after a consumer proposal in Ontario can be a challenging journey. However, with patience, discipline, and the right strategies, you can regain control over your finances and rebuild a strong credit profile. Remember, it’s not a race but a marathon. Take one step at a time towards financial stability and freedom.

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