You want to eliminate your debts by filing a consumer proposal, but you are afraid that your credit score will be harmed, and you will never be able to borrow again. Most of the people I meet with have that same worry. You are not alone. Fortunately, I have some good news:
In most cases a consumer proposal will improve your credit score.
Here is an actual case history (with all identifying information changed):
Joseph M. (not his real name) was laid off and got behind on his payments. He returned to work but was worried about a wage garnishment. He owned a house, but it was fully mortgaged. He filed a consumer proposal, and his creditors accepted his proposal.
He completed his proposal, and two months later he paid to get his credit score (unfortunately while you can get a free copy of your credit report, you have to pay to get your credit score). His credit score was 639. He applied for and received a credit card with a credit limit of $2,000. Five months after his proposal was completed his credit score had increased to 673. A lender approved him for a small loan to do home repairs, and one year after the completion of his proposal his credit score was 750.
Joe went from a credit score in the bottom 15% of the population before filing his proposal to a credit score in the top half of the population one year after his proposal was completed.
Filing a consumer proposal improved Joe’s credit score.
Follow A Credit Improvement Plan
Of course filing the consumer proposal was not the only reason that Joe’s credit score improved. Filing a consumer proposal was the beginning stages of Joe’s plan to rebuild his financials and begin to repair his credit.
Joe owned a house, with a mortgage, and he kept his mortgage payments up to date, and since payment history and amounts owed are the two biggest factors in your credit score, Joe was in a good position to maintain and improve his credit score.
In addition, Joe took positive steps to improve his credit score. He kept his expenses under control, and he applied for a small credit card which improved his credit score. Joe had a good job and worked hard to demonstrate that he is worthy of a good credit score.
Joe’s situation is not unique. I have helped thousands of Canadians over the years eliminate their debt by filing a proposal, and with their debt eliminated most are able to work smartly to improve their credit score.
For you, filing a consumer proposal may be the first step towards improving your credit score.