How Will a Consumer Proposal Affect my Credit Rating?

Understanding the Impact of a Consumer Proposal on your Credit Rating

Being burdened by debt can be a daunting experience, with bankruptcy often seen as the only escape. However, that’s not all there is. There’s a silver lining in the form of Consumer Proposals, a debt relief solution which offers several benefits, including a less drastic impact on your credit rating compared to bankruptcy.

How Credit Scores are Calculated

The calculation of your credit score is influenced by several factors, including the timeliness of your payments, and whether you’re currently involved in a Consumer Proposal or bankruptcy. Here’s a snapshot of how each stage affects your credit rating:


R1 – Payments made to creditors on time.

R2 – Payments are 30 days overdue.

R3 – Payments are 60 days overdue.

R4 – Payments are 90 days overdue.

R5 – Payments are 120 days overdue.

R6 – Typically not utilized.

R7 – Participation in a Consumer Proposal, consolidation order, or debt management plan.

R8 – Indicates that a secured creditor has taken steps to realize on their security.

R9 – A bad debt placed for collection or considered uncollectible, or bankruptcy.


Impact of a Consumer Proposal on your Credit Rating

In the context of credit rating, a Consumer Proposal is ranked as R7. If you were to go bankrupt, it would be R9 – the worst score possible. Your credit score remains at R7 until your proposal is fully completed.

After the completion of your proposal, a note is placed on your credit record indicating that you’ve completed a Consumer Proposal. This note stays there for three years post-completion. During this period, you can take steps to rebuild your credit. For instance, you can secure a credit card, get a RRSP loan, or ensure all future credit payments are completed on time.

Consumer Proposal vs Bankruptcy

In general, many people prefer a Consumer Proposal over bankruptcy partly due to this lesser impact on their credit score. If you’re uncertain whether a Consumer Proposal is the right debt solution for your unique situation, it’s advisable to consult a Licensed Trustee to understand your options.

In conclusion, understanding the impact of a Consumer Proposal on your credit rating is a critical aspect of managing your debt. It allows you to make an informed decision, ensuring you select the most appropriate debt relief option for your financial circumstances.


Understanding the impact of a Consumer Proposal can help you make an informed decision about your financial future.


Contact a Licensed Trustee


For personalized advice on Consumer Proposals, it’s best to consult a Licensed Trustee.

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