One positive aspect of filing for bankruptcy is that it gives you the opportunity to start fresh. Part of starting fresh means rebuilding your credit rating. Many individuals believe that you are unable to obtain credit, or rebuild your credit rating, until the bankruptcy has been purged from your record. For a first time bankruptcy it is on your credit report for 6 years from your date of discharge, fourteen years for a second time bankruptcy and three years after completing your consumer proposal. In fact, it is a good idea to start rebuilding your credit rating upon receipt of your discharge from bankruptcy, or your certificate of full performance for a consumer proposal.
The first step in rebuilding your credit is to perform a credit check on yourself to make sure that everything is accurate. This can be done through visiting the websites for two main credit bureaux in Canada: Equifax.ca and Transunion.ca. Once you get a copy of your credit report, check it carefully to make sure that everything listed is accurate.
All of the debt that you listed in your bankruptcy or consumer proposal should not be showing as active or collectable. Your bankruptcy or consumer proposal should be listed on your report, as should your date of discharge, or the date you completed your consumer proposal. Errors in your credit bureau reports can lead to lower overall credit scores and cause issues with obtaining credit in the future. It is much easier to get them corrected early in the rebuilding process than it would be to correct years from now when you may really need it fixed.
Once your credit bureau report is accurate, the next step is to review the various products that are on the market to determine if they are right for you. You may wish to make an appointment with a customer service manager at your bank for assistance on determining which products are right for you.
One common product is a secured credit card. This product acts like a regular credit card, but requires a deposit should you default. There are different companies that offer this product and some require the deposit up front, while others allow you to pay the deposit amount over several months. A good tip is to pick an item that you are already paying for comfortably in your budget and have it billed to the credit card. Then, set up the payment in your online banking to pay that amount off each month in full. This allows for responsible but regular use of the card, which will be reported to the credit bureau.
If you have the room in your budget to make the monthly payment, you may also wish to consider an RRSP loan. The bank is usually open to lending money for the purchase of an RRSP that is put on deposit at their bank. If you choose this option, make sure that they are going to report the loan to the credit bureau so that it can start improving your score. The added benefit is that you are also increasing your net worth as after paying the loan, you will have an RSP account in your name.
In time, the bankruptcy debt will be deleted from your credit bureau report and only this new, positive debt will be showing on your credit bureau. This will significantly improve your score and will help ensure that your credit score will not be a problem as you move forward. No matter which products you choose to help you rebuild make sure you consider their impact on your overall budget and that you are using that credit responsibly.