When you file a consumer proposal, your consumer proposal administrator files your proposal with the Office of the Superintendent of Bankruptcy (the “OSB”), the government agency that regulates both proposals and bankruptcy filings in Canada. The OSB then forwards a notice that you have filed to the credit reporting agencies in Canada (Equifax and Trans Union are the two largest credit bureaus). From that point, three changes will occur on your credit report:
First, a note listing the fact that you have filed a proposal, with the date of filing and the name of your administrator, is added to the “Legal” or “Registered” section on your credit report. This indicates that you have filed a proposal, and not a bankruptcy.
Second, your credit report will rate you as an R7. Perfect credit is R1, indicating that you have paid your Revolving accounts, like a credit card or bank loan, as agreed. If you are 30 days late you move to an R2, and so on. A consumer proposal is coded as an R7. A bankruptcy is coded as an R9, so a proposal is slightly better than a bankruptcy in terms of this rating.
Third, each individual creditor will will include a note on your file, generally stating “included in proposal” on their account.
How Long Does The Consumer Proposal Stay on My Credit Report?
Both Equifax and Trans Union “purge” all consumer proposal information three years after you have made your final payment and completed your proposal.
Do I Have to Wait Three Years to Borrow Again?
Your ability to borrow after you have completed your proposal is based on a number of factors, including your income, the value of assets you have to pledge as security (such as a house), and the amount you are borrowing.
You should consult your consumer proposal administrator for a list of lenders in your area that will lend upon completion of your proposal. Generally it is possible to qualify for a new mortgage two years after you have completed your proposal, provided you have sufficient income and a suitable down payment.
A consumer proposal does affect your credit report, but it also eliminates your debts, so for most people the elimination of debts and a fresh start is more important than attempting to preserve a credit rating.