Life After Debt: How To Rebuild After A Bankruptcy Or Consumer Proposal

After completing a Bankruptcy or Consumer Proposal, rebuilding your credit can feel nearly as daunting as getting out of debt. It can feel like you’ve spent all your energy summiting one insurmountable peak only to face another equally daunting climb ahead.

But when you’re standing at the bottom looking up yet again, remember how much stronger and more capable you are then when you started all those months ago.

After completing a Bankruptcy or Consumer Proposal, rebuilding your credit can feel nearly as daunting as getting out of debt. It can feel like you’ve spent all your energy summiting one insurmountable peak only to face another equally daunting climb ahead.

But when you’re standing at the bottom looking up yet again, remember how much stronger and more capable you are then when you started all those months ago.

As with any climb, you don’t have to do it all at once. Just a few steps every day will get you where you want to go. The following trail map will help you focus on your goals, outline your process and visualize the reward that’s waiting for you at the top.

Step One: Get Your Credit Report

Upon completing your Bankruptcy or Consumer Proposal, the very first thing you’ll want to do is request your credit report from Equifax and TransUnion and check it for accuracy.

A report that is full of errors, poor reporting and inaccurate ratings will delay your ability to rebuild credit. It would be like trying to hike a steep, rocky trail in flip flops, when what you really want is a sturdy, supportive pair of hiking boots.  

Do yourself and your future financial life a favor: Become intimately familiar with the good, bad and ugly details of your credit report and immediately fix any errors or inaccuracies.

Step Two: Decide Where You Want to be Financially

Climbing a mountain takes planning. Before you ever set foot on the trail, you need to know where you’re going and what you need to get there. Rebuilding your credit is no different.

Think about your financial destinations and write them down. Depending on your goals, certain types of credit products may help you get there. 

• Interested in purchasing a house one day?
• Hoping to buy a new vehicle in a few years?
• Intend to borrow money for renovations on your current home?
• Need loans to further your or your children’s education?
• Want the peace of mind of knowing credit will be there if you ever need it?

These goals are all achievable for you. But only with the right process, commitment and a clear sense of direction. The sooner you set your intentions, the sooner you’ll get there.   

Step Three: Pick Your Path

Not all paths will lead to the top of the mountain. Similarly, not all paths to rebuilding your credit will suit your unique situation and goals.    

Secured Credit Cards

Some lenders may require you to pay a security deposit to qualify for a credit card. Like a damage deposit on a rental home, this provides added insurance to your lender if you fail to make your payments. Your lender will keep your deposit – and pay you interest on it – until you qualify for an unsecured card.  

Your limit will be low, but ensure you keep your balance even lower – if not zero – and only use the card for something you will pay back immediately. This is the safest way to manage your credit, especially if it’s been a challenge in the past.

Once you build your credit reputation with the lender, they may increase your limit and / or remove the secured status on the card. However, this is not a green light to spend more or be careless. It is a reward for responsibly paying for your credit.

Instalment Loans & Lines of Credit

Eventually, you can start looking at longer term credit products like an instalment loan or line of credit. 

An instalment loan with a set payment schedule is one of the safest ways to rebuild your credit, as you are unable to access the money you’ve repaid. You’ll just want to make sure your lender reports your monthly payments to the credit bureaus.  

A line of credit is a revolving credit product with a large credit limit. These offer low interest and low minimum payments. But a word of caution: ready and repeatable access to credit often fools people into thinking they have the freedom to spend frivolously and that’s not a trap you want to fall into.   

Multiple Types of Credit

If one of your financial destinations is to purchase a home, a multi-leveled path is your best bet. Having two to three forms of revolving credit – like credit cards or lines of credit – actively using the cards for two to three years and building your limits up to certain levels is the most effective way to build your credit. 

This is the path many mortgage professionals recommend for establishing a quality credit history and score, and to make it easier to qualify for a mortgage when you’re ready. This road is longer and requires conscientious planning and management. But what it costs in time and effort, it more than makes up for in options and opportunities down the road. 

Step by Step

There’s an old proverb that says, “if you want to go fast, go alone. If you want to go far, go together.” It’s just as true if you’re climbing a mountain or working to rebuild your credit. Learn from other’s experiences and expertise. Explain your goals to a financial professional. Ask for recommendations and help evaluating your options.

Finally, take your journey one step at a time. Don’t forget to stop every now and again to appreciate the journey, enjoy the view and celebrate how far you’ve come.

Life-Changing Debt Solutions

If you’re currently struggling with overwhelming debt and wonder whether a Life-Changing Debt Solution is right for you, consider scheduling a Free Confidential Consultation with a Licensed Insolvency Trustee to learn your options.

Your Licensed Insolvency Trustee will review your entire financial situation, seek to understand your goals and challenges and identify opportunities for you to achieve the financial fresh start you need and deserve. Whether you qualify for Bankruptcy or a Consumer Proposal, or would benefit from one of several other paths to debt freedom – such as a consolidation loan or budgeting advice – they’ll help you choose the best path to defeat your debt once and for all.