How Long Does it Take to Get My Credit Back After Bankruptcy?

Getting Credit Back After Bankruptcy

Although bankruptcy can be an effective way of overhauling your finances and eliminating unmanageable debt, many people are hesitant about using this option.

Often, people assume that bankruptcy has a permanent impact on their financial standing.

In fact, ‘how long does it take to get my credit back after bankruptcy?’, is one of the most common questions surrounding the issue.

Fortunately, the impact of bankruptcy isn’t as long-lasting as you might think.

When it comes to determining whether bankruptcy is the right option for you, there are two key factors to consider.

Firstly, how long will bankruptcy stay on your credit file and, secondly, how can you rebuild your credit history following bankruptcy.

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How long does bankruptcy stay on your credit file?

In Canada, your credit report will show your bankruptcy for at least six years after you are discharged from your debts.

In contrast, a consumer proposal remains on your credit file for at least three years after the final payment has been made.

When bankruptcy or a consumer proposal is present on your credit file, it can be extremely difficult to access any type of credit.

Unsurprisingly, creditors won’t consider you to be a good borrower if either of these debt solutions is listed on your credit file.

However, they won’t be listed on your credit report forever and you can start rebuilding your credit rating straight away.

How can you rebuild your credit rating after bankruptcy?

When lenders assess your suitability as a borrower, they consider a number of factors.

Although your credit history does have a significant impact on their decision to approve a credit application, they also take your income, assets, potential down payments and guarantors or co-signers into account.

By focusing on these other areas, you can enhance your borrowing power and access a wider range of financial products, even when a bankruptcy or consumer proposal is still listed on your credit file.

You may want to boost your income by enhancing your skills and securing a promotion, for example.

Alternatively, you might discuss the possibility of a family member acting as a co-signer in the future to help you secure credit.

In addition to this, building your savings will help to decrease your reliance on debt and ensure you have suitably large down payments for any future borrowing.

Using a secured credit card

Once your bankruptcy or consumer proposal has been removed from your credit file, the chances of obtaining a credit increase.

However, it’s important to be very vigilant about what agreements you enter into if any.

It’s likely that you will only be offered credit with a high interest rate to begin with, so don’t risk getting into bad debt or financial difficulties again.

If you do want to use credit to help rebuild your rating, a secured credit card could be a viable option.

Unlike most credit cards, a secured card means that your assets are used to secure the debt.

If you fail to make payments or fall behind, the creditor is entitled to seize your assets in return.

This additional security makes you less of a risk to the lender but it’s still likely you’ll be paying high interest rates too.

A secured credit card can help you to prove that you’re able to manage your finances responsibly, providing you pay off the full outstanding balance every month.

If you’re unable to do this, taking out credit following a bankruptcy probably isn’t the best idea.

However, if you have been able to save some money throughout your bankruptcy, you could use this to make monthly payments and clear the balance of a secured credit card.

Over time, your ability to make regular repayments will enhance your credit rating and your R score will improve.

As a result, you’ll find it easier to obtain credit at a better interest rate.

Providing you’re managing your finances well, a second credit card or a small secured loan can also be used to highlight your financial management.

Is bankruptcy right for you?

Filing for bankruptcy or making a consumer proposal is a big decision.

Before you decide how to manage your debts, it’s important to access advice and assistance.

At Bankruptcy Canada, we’ve helped over 100,000 Canadians resolve their debt issues.

To learn more or to access debt relief services, contact us today on (877) 879-4770.

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