Negative information on your credit report can feel crippling. After you declare bankruptcy, that information stays on your credit report for six years from the date of your discharge. That number increases to 14 years if it’s not your first bankruptcy.
All information about your credit comes from lenders. They report information to Canada’s two large credit reporting agencies, Equifax and Trans Union. The two different agencies report things a little differently.
People ask us at David Sklar & Associates all the time how long bankruptcy will be on their credit history. Equifax automatically purges a bankruptcy from your credit report six years after your date of discharge. Trans Union, however, will continue to show your bankruptcy for up to seven years after your discharge, the maximum amount of time allowed in Ontario.
Six years is a long time to wait for a bankruptcy to come off your credit report and start rebuilding your credit history. Lenders rely on your credit history to assess the risk of lending money to you.
Everything from a mortgage to a car loan to a credit card can depend on your credit history. When you have a bad credit score, it’s not just harder to get a loan, it also makes loans more expensive. Because they take on a higher risk, the lender expects a higher interest rate. That can cost you in the long run.
If you have been thinking about declaring bankruptcy but you’re worried about long-term consequences, keep in mind that you don’t have to wait six years to start rebuilding your credit. There are a few things you can do before bankruptcy is taken off your credit report to get started.
#1 Get Your Credit Report
The first thing you should do is check your credit report to see what it looks like. If you see a mistake that negatively impacts your credit, bring it to the agency’s attention. If you’ve recently declared bankruptcy, your score may be very low. Often people who have declared bankruptcy missed a number of payments beforehand as well, which is bad for your credit score.
#2 Credit Counseling
Credit counselling is available from David Sklar & Associates, and in many cases, you must take credit counselling courses after a bankruptcy or consumer proposal. In addition, to help with the personal bankruptcy process, credit counselling will teach you how to rebuild your credit.
#3 Improving Your Credit History
The most effective way to turn your credit report around is to keep things positive. Pay your bills in full and on time, with no exceptions. Trim down your credit cards to one, which you can use to make small purchases that you pay in full immediately. You do need to keep using credit to improve your score. No credit history since your bankruptcy won’t help you either.
#4 Be Wary of Loans
Be wary of high-interest loans while in a consumer proposal or a bankruptcy. It may be tempting to accept a debt consolidation loan or another high-interest loan to settle debts or make a big purchase, but it can hurt you in the long run.
Here at David Sklar & Associates, we help get people out of debt and rebuild their credit histories. You can rebuild your credit history long before bankruptcy has been cleared from your report.