How to Repair Credit After Bankruptcy

Rebuilding Credit After Bankruptcy

Declaring bankruptcy can have a significant impact on your credit score and financial well-being. However, it’s important to remember that bankruptcy is not the end of your financial journey. With careful planning, discipline, and commitment, you can rebuild your credit and regain financial stability. In this comprehensive guide, we will explore the steps you can take to repair your credit after bankruptcy in Canada. From completing your bankruptcy process efficiently to establishing healthy financial habits, we will provide you with a roadmap to a stronger financial future.

It is a common misconception that a person has to wait 6 years after his discharge, until the record of his bankruptcy drops off the credit bureau report, until he or she can start rebuilding credit after bankruptcy.

This is not true! 

A person can start to rebuild credit as soon as he is discharged from bankruptcy.

Rebuilding credit after bankruptcy will be quick and painless if you follow the steps provided here.

You will be able to get a secured credit card and a car loan shortly after you are discharged.

Make sure your credit limit stays manageable and you don’t get close to the limit.

Any discharged bankrupt will be able to get a mortgage – the hardest credit to secure – at an interest rate comparable, or better, than a person who has never gone bankrupt, two years after the bankruptcy discharge.

Paying your bills on time and making monthly payments will help you improve your credit.


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These are the steps we are going to cover in rebuilding credit after bankruptcy

Step 1: Complete Your Bankruptcy Process Efficiently

The first step towards rebuilding your credit after bankruptcy is to complete your bankruptcy process as efficiently as possible. In Canada, if you have never been bankrupt before, you may qualify for an automatic discharge from bankruptcy in as little as nine months. To achieve this, you must fulfill your monthly payment obligations, regularly communicate with your trustee, and attend credit counseling sessions. By expediting the completion of your bankruptcy, you can ensure that it disappears from your credit report sooner, allowing you to start the credit repair process.

Step 2: Save Money

Building savings is crucial when it comes to repairing your credit. It is a well-known fact that banks are more likely to lend money to individuals who have proven their ability to handle financial responsibilities. By demonstrating that you have savings, you show lenders that you are financially responsible and capable of managing money. If you were making monthly payments to your trustee during your bankruptcy, continue making those payments but redirect them to your own savings account. Building a solid foundation of savings will pave the way for future borrowing opportunities.

Step 3: Obtain a Copy of Your Credit Report

To begin repairing your credit, obtain a copy of your credit report from the two largest credit bureaus in Canada, Equifax and TransUnion. Review your credit report carefully to identify any errors or inaccuracies that may be negatively impacting your credit score. If you come across any debts that were included in your bankruptcy but still appear on your report, promptly notify the credit bureau to rectify the situation. Regularly checking your credit report will allow you to track your progress and ensure that your efforts to rebuild your credit are reflected accurately.

Check your credit report and write to the credit bureau to correct any errors.

Never pay anyone to clean up your credit report. Do it yourself following our detailed steps.

The Office of the Superintendant of Bankruptcy will update Equifax and TransUnion of the fact of your discharge from bankruptcy.

The credit bureaus will correct mistakes on your credit report.

They will not remove information that is correct.

Now that you have your Absolute Discharge, you need to clean up your credit score, or ensure that it is clean already.

It is very common to see multiple errors on credit scores.

Once you are discharged your existing balances should be marked as included in bankruptcy

Check your Credit Report to see if you have to correct errors.

Get a free credit report from Equifax and TransUnion by downloading the forms.

You will get your report in a few weeks.

Note: A credit card in your name is not required to place these orders.

Note: A credit card in your name is required to place these orders.

You can pay for Equifax’s report online and have it instantly.

Note that the online report costing $23.95 includes your credit report and your credit score.

The online report costing $15.50 only includes your credit report.

You can pay for TransUnion’s report online and have it instantly.

Correcting Errors on EQUIFAX

  • Use the Equifax form, which you fill out online.

    You would use this form if you are disputing bankruptcy or proposal related items.

    Don’t forget to include copies of your Discharge Certificate or Certificate of Full Performance of your proposal, and the List of Creditors and all other relevant documents.

Correcting Errors on TRANSUNION:

  • Full name
  • Current address
  • Previous address (if less than two years at current address)
  • Date of birth
  • Social Insurance Number (optional)
  • Employment information (optional)
  • Telephone number (optional)
  • Name of the company you have a dispute with (from your credit report)
  • Account number, if available, of the disputed item (from your credit report)
  • Reason for your dispute (e.g., you have paid the account, etc.)
  • Documentation to support the amendment you have requested. If the amendments are to your personal information (e.g., name), please provide supporting identification documentation, such as change of name certificate, marriage certificate, etc.

If you are still not satisfied that your file is correct:

  1. You may wish to contact your provincial / territorial regulator responsible for consumer affairs (as credit reporting agencies falls under provincial / territorial jurisdiction).
  2. You can also contact the Federal Privacy Commissioner (except in the case of Quebec, B.C. and Alberta where you should contact the Provincial Privacy Commissioner).

    The Personal Information Protection and Electronic Documents Act (“Personal Information Protection and Electronic Documents Act”(PIPEDA) also sets out ground rules for how private sector organizations can collect, use or disclose personal information in the course of commercial activities.

    Under “Personal Information Protection and Electronic Documents Act” PIPEDA individuals have a right to see the personal information that a business holds about them, to correct any inaccuracies and to lodge a complaint with the Privacy Commissioner of Canada if they are unhappy with how an organization is handling their information.

Please note: If the incorrect information comes from a federally regulated financial institution, the Financial Consumer Agency of Canada (“Financial Consumer Agency of Canada” FCAC) website provides additional information on how to get errors corrected.

Step 4: Secure a Visa Card

Rebuilding your credit after bankruptcy often involves establishing a positive credit history. One effective way to do this is by obtaining a secured Visa card. With a secured Visa card, you use your savings to place a deposit, which serves as collateral. The credit card company then grants you a credit limit equivalent to your deposit. By using this card responsibly and making timely payments, you can demonstrate to creditors that you are capable of managing credit effectively. Over time, the positive payment history associated with your secured Visa card will contribute to the improvement of your credit score.

Step 5: Invest in an RRSP

Another strategy to rebuild your credit after bankruptcy is to invest in a Registered Retirement Savings Plan (RRSP). By utilizing a portion of your savings to contribute to an RRSP, you can potentially access additional funds from the bank. For instance, if you invest $1,000 in an RRSP, the bank may be willing to lend you an additional $1,000 to contribute towards your RRSP. Not only does this contribute to your retirement savings, but it also demonstrates responsible financial behavior and helps improve your credit report. The repayment of the loan will be reflected positively on your credit history, showcasing your ability to fulfill financial obligations.

Step 6: Continue Saving

As you progress in your credit repair journey, continue saving diligently. By consistently setting aside funds, you will eventually accumulate enough for significant purchases such as a car or even a down payment on a house. The habit of saving will not only enhance your financial stability but also serve as a testament to your commitment to responsible financial management. Remember, rebuilding your credit after bankruptcy requires patience and discipline, and continuing to save will contribute to your long-term financial success.

Accumulate your Down Payment.

What are the General Requirements to Qualify for CMHC Homeowner Mortgage Loan Insurance? (updated December 12, 2017)

  • The home is located in Canada.
  • For CMHC-insured mortgage loans, the maximum purchase price or as-improved property value must be below $1,000,000.
  • You will typically have a minimum down payment starting at 5%.

    For a purchase price of $500,000 or less, the minimum down payment is 5%.

    When the purchase price is above $500,000, the minimum down payment is 5% for the first $500,000 and 10% for the remaining portion.

  • Normally, the minimum down payment comes from your own resources.

    However, a gift of a down payment from an immediate relative is acceptable for dwellings of 1 to 4 units.

    For eligible borrowers, additional sources of down payment, such as lender incentives and borrowed funds, are also permitted.

    Check with your lender for qualifying criteria and availability.

  • Your total monthly housing costs, including Principal, Interest, Property Taxes, Heating (P.I.T.H.), the annual site lease in the case of leasehold tenure and 50% of applicable condominium fees, shouldn’t represent more than 32% of your gross household income (Gross Debt Service (GDS) ratio).
  • Your total debt load shouldn’t be more than 40% of your gross household income.

    The Total Debt Service (TDS) ratio is your P.I.T.H. + the annual site lease in the case of leasehold tenure and 50% of condominium fees (if applicable) + payments on all other debt / gross annual household income.

  • You also need to think about closing costs (for example, legal and land transfer fees) equivalent to 1.5% to 4% of the purchase price.

    Many first-time buyers are surprised by these costs.

    Closing costs include but are not limited to one-time items such as lawyer fees, GST and PST as applicable, land transfer tax if applicable, adjustments, etc., to allow you to complete the house purchase.

  • Other requirements may apply and are subject to change. For details, please contact your lender or mortgage broker.

Contact a Mortgage Professional who is experienced at helping people, who were in bankruptcy, filed a proposal or a consumer counselling debt program, get a mortgage.

Caution, if you plan on going to your local bank for a mortgage!

First, they probably don’t know the rules on getting you a mortgage at the best rates possible.

Second, they are likely to turn your mortgage application down.

Worst yet, you may find yourself locked into a poor mortgage that will cost you thousands of dollars more than by using an experienced mortgage professional.

Mortgage professionals will get you a mortgage at the same interest rate, as the most creditworthy person who has never been in bankruptcy.

You will pay nothing for the services of a mortgage professional.

Once you have received your bankruptcy discharge after declaring bankruptcy, you can begin rebuilding your credit.

By improving bad credit you will eventually receive all the rewards of your new debt free life!

A popular way to start improving your credit worthiness following a bankruptcy is to use a secured credit card.

By using such a secured card, you will make a security deposit with the credit card company that will allow you to get a credit limit up to the security deposit you made.

This is what makes your card “secured.”

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Rebuilding your credit after bankruptcy in Canada is an achievable goal with the right approach and mindset. By completing your bankruptcy process efficiently, saving money, obtaining a copy of your credit report, securing a Visa card, investing in an RRSP, and continuing to save, you can gradually rebuild your credit and regain financial stability. Remember to consistently monitor your progress, adapt healthy financial habits, and make timely payments to demonstrate your creditworthiness. With determination and perseverance, you can successfully repair your credit and pave the way for a brighter financial future.

For more information on rebuilding your credit after bankruptcy or a consumer proposal, consult a licensed Trustee or financial professional.

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