How to rebuild your credit after a Consumer Proposal

Filing a Consumer Proposal can feel like the end of the world. Like an emotional and financial wound that may never fully heal — particularly when it comes to your credit score. 

But here’s the good news: Your credit score won’t be permanently damaged. You can rebuild your credit and return to good financial standing. 

A Consumer Proposal isn’t the end of your financial story. Instead, think of it as the beginning of a new chapter — an opportunity to reassess, reset, and rebuild. With the right guidance, a strategic plan, and a commitment to making smart financial decisions, you can develop a healthier relationship with money and regain control of your financial future.

Rebuilding credit requires patience, discipline, and determination. The road to recover isn’t a quick one, but a positive mindset and a well-structured plan can set you on the path to financial resilience.

 This isn’t a failure — it's a fresh start.

Assess your post-proposal credit status

After you have met the terms of your Consumer Proposal, it’s important to check your credit report. It’ll take about three months for creditors to update your records, so keep this in mind. When reviewing your report, make sure all accounts included in your proposal are marked as “Discharged,” not “Delinquent.”

Keep your eyes peeled for mistakes. If you spot any errors, file a dispute with the credit bureau to have them corrected. 

Learn through the process

Budgeting is one of the key lessons you’ll learn during any insolvency proceeding. And it’s important to continue to apply this discipline after you’ve met the terms of your Consumer Proposal. By creating a detailed budget for all your expenses, you set yourself up to stay in control of your finances and live within your means.

Responsible money management not only supports your financial recovery but demonstrates to future lenders that you can handle credit wisely.

Take control of your credit journey

Applying for a secured credit card can be an effective way to start rebuilding your credit. This type of card requires you to put down a refundable security deposit — typically between $300 and $500 — to serve as your credit limit. Make sure you choose an amount you’re comfortable managing.

Then, use the card for small, necessary purchases, always making sure to pay the balance in full each month. This responsible use helps you to establish a positive payment history and demonstrates proper credit use, which are essential for improving your credit score.

When rebuilding your credit, it’s important to manage your credit utilization ratio. This is the percentage of your total available credit that’s being used. The lower the percentage, the better — aim to keep your usage below 30 percent of your available limit. This demonstrates responsible credit management and can significantly improve your credit score over time.

A credit-builder loan is another useful tool for rebuilding credit. Offered by some credit unions and smaller financial institutions, these loans work by holding the borrowed amount in a secured savings account while you make fixed monthly payments. Then, once the loan is fully repaid, the funds are released to you. Throughout the process, your on-time payments are reported to credit bureaus, helping you establish a positive credit history.

Avoid these pitfalls 

Timely payment of all your bills is crucial when rebuilding credit. Even a single missed payment can impact your credit score and remain on your credit report for several years.

More importantly, missed payments can make lenders hesitant to extend credit to you in the future. This can be avoided by setting up pre-authorized or automatic payments for all your bills. And if paying the full balance is not possible, arrange for the minimum payment to be paid automatically. This can help you maintain a consistent payment record and reduces the risk of missing payment deadlines.

When you’re rebuilding credit, you’ll want to avoid applying for multiple credit accounts within a short period of time. Each time you apply for credit, there’s a hard inquiry on your credit report, which, in turn, can lower your credit score.

Additionally, excessive credit applications can be a sign of financial instability to lenders, potentially making it harder for you to obtain credit in the future. So, when you’re applying for new credit, make sure you’re selective and intentional. This will help you to protect and strengthen your credit profile.

Lastly, try to avoid rushing the process. Rebuilding you credit requires patience and persistence. Remember, a Consumer Proposal will mark your credit report for a maximum of six years after the filing date — or three years from the completion of the proposal terms.

Over time, the impact will lessen, especially as you demonstrate responsible financial management. So, stay committed, give the rebuilding process the time it needs, and your efforts will be rewarded with an improving credit score.

We can help you rewrite your financial story

Filing for insolvency is tough, emotionally and financially, and it might seem like there’s no way forward. But it can also serve as a turning point, or a blessing in disguise. Oftentimes, rock bottom can be the foundation for rebuilding a stronger, more secure future.

Remember, you are not alone in this process. With the support of your family, friends, and a Licensed Insolvency Trustee (LIT), you can regain your footing. By taking the right steps, practicing patience, and leaning on the support around you, you can come back stronger than ever before — both financially and personally.

To learn more, reach out for a free, no-obligation consultation.

Tina Powell is Senior Vice President and an LIT with MNP Ltd. She’s based in Dartmouth, NS.