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“I will never get credit again” – I hear that refrain from many of the people I help. They believe that, once they file for protection from their creditors, they will never be able to obtain a credit card, finance a vehicle or purchase a home.

But nothing could be further from the truth.

That’s because once you fulfill the repayment requirements of your Proposal and your debts are discharged, you will be effectively debt-free. And being debt-free makes you far more capable of handling appropriate amounts of debt. Smart lenders know this.

Once a Consumer Proposal is successfully completed and the credit bureaus notified of this important milestone in your credit history, the Bureau will bump your credit rating up to R7. And three years afterwards your rating will rise again to an R1 – this signifies a perfect financial bill of health and makes you a great credit risk. And that’s the goal.

Six Simple Steps To Rebuilding Your Credit After A Consumer Proposal

The following are some simple steps you can take to rebuild your credit rating in the time between the successful completion of your Proposal and that three-year waiting period:

Step One: Obtain a secured credit card. A secured credit card is set up so that you provide the lender with some collateral (anywhere from 10% to 100% of the credit given) to “secure” the card. This provides the creditor with protection should you fail to make your credit card payments and since it’s reported to the credit bureau monthly, an excellent vehicle for you to rebuild your credit.

Step Two: Pay ALL of your bills on time. Not falling behind on your monthly bills is essential to building, and maintaining, a solid credit rating. That makes paying your monthly bills on time, or (if possible) ahead of time.

Step Three: Keep the balances owing on your debts as low as possible. The goal is 30% or less of the total credit available. So try to pay the balance in full. If that is not possible then make sure the monthly minimum payments are made.

Step Four: Never exceed the credit limit set on your credit card. If you go beyond the existing amount of credit provided to you, the lender will slap you with an additional interest penalty. Avoid this at all costs.

Step Five: Prepare a realistic budget and stick to it. A regular budget or cash flow analysis will help you identify where your money is coming from and how you are using it. To see where you stand, jot down a quick list of your household expenses. Then compare the total to your monthly net (after tax) income.

Step Six: Never ignore those utility and cellphone bills. Utility firms are the quickest to report delinquent payments to the credit reporting agencies – never let those payments slip or your credit rating will suffer as a result.

Eliminating Debt & Rebuilding Your Life With A. Farber & Partners Inc.

Remember: There is no better way to improve your credit than to prove to new lenders that you are a responsible consumer who is capable of making consistent monthly payments. After a period of time doing this your credit history will reflect the regular use and repayment of credit. You will then be well on your way to a perfect credit score (R1).

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What It Means To File A Consumer Proposal In Ontario