Credit rating: affected by bankruptcy
Your credit rating is based on your credit history, kept by a credit bureau. It is calculated from monthly reports from lenders. When you file for a bankruptcy, proposal, or consumer proposal, the Office of Superintendent of Bankruptcy (OSB) reports this information to the credit bureaus. A credit bureau creates a credit report available for purchase by all potential creditors.
You are eligible to receive a copy of your own credit report once a year by mail, for free. You will be charged a fee for any additional copies.
Bankruptcy will definitely affect your credit rating. However, if you are unable to pay your bills and are in such an overwhelming financial situation that you are considering bankruptcy or a consumer proposal, you will already have a credit rating problem.
Once you are discharged from bankruptcy, you can start to rebuild your credit score.
Bankruptcy and credit rating
The main credit bureaus in Canada are Equifax and Trans Union.
- For a first bankruptcy, Equifax keeps the record on your credit report for 6 years from the date of your discharge. Trans Union keeps it for 6 to 7 years from your discharge, or 14 years from filing. This may vary between provinces, as provincial legislation differs.
- For a second bankruptcy, Equifax keeps the record on your credit report for 14 years.
Restoring your credit rating
Taking steps to repair your credit score is important moving forward. Ways to do this are:
- Make sure you are discharged from your bankruptcy as soon as possible by making all monthly payments and reports, and fulfilling all your bankruptcy or proposal responsibilities.
- Start saving money, to prove that you are financially responsible. Creditors will look favourably if you have a growing savings account.
- Pay all your bills on time. Any late payments will reflect badly and could prevent you from receiving credit.
- You may want to start with a secured credit card (a credit card with a credit limit secured by your savings or an initial deposit), and make sure you use it wisely.