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Rebuilding Your Credit

At Farber our goal when you do a consumer proposal or bankruptcy with us, is to provide you with three positive outcomes:

 

  • Protection from your creditors
  • Relief from your debts
  • Advice on rebuilding your credit

 

The benefits of getting creditor protection and eliminating your debts can be reviewed in various sections of our website. The purpose of this page is to help you understand the process of rebuilding your credit.
In many ways this last element is the most important element of the process you go through when you do a consumer proposal or file for bankruptcy.

Rebuilding Your Credit

What is your credit score

Your credit score is a number that describes that status of your payment history on amounts owing to your creditors. If you are always current and have not missed any payments you will core a “1” the best possible score. If any of your payments are overdue then you will be scored anything from a “2” to a “5” depending on how long the amounts are overdue. Anything above a “5” up to a “9” suggests that there are serious problems with respect to your payment history. In general therefore, missed or late payments or lots of “maxed out” credit accounts will lower your score.

Your credit score is used for two purposes: to determine whether you are eligible for new credit and if so what interest rate should you be charged. With a very low score ( ratings of 5 to 9) you could be denied new credit. If you do get new credit, then the lower the score the higher the interest rate that you will be charged.

Your objective when you have filed a consumer proposal or filed for bankruptcy, should be to rebuild your credit score as quickly as possible. Once you have achieved this you will be charged lower interest rate and this will save you large amounts of money when it comes to taking out a mortgage for a new house or getting an auto loan for a new car. Here is an example of the savings you can make with a good credit score

 

Car Loan Example Good Credit Bad / No Credit
Loan amount $15,000  $15,000
Interest rate 2.9% 24.99%
Term 6 years 6 years
Monthly payment  $227  $404
Total interest  $1,360  $14,065

 

Good credit will save $12,725 on interest in 6 years


In order to rebuild your credit, you need to have a history showing that you have made your payments on time. This can be done in several ways including using a secure credit card or taking out a small loan on which you can easily manage the repayments.


Rebuilding your credit takes time so the sooner you start the sooner you will again get access to credit at reasonable interest rates and the more money you will save.