By how much will my credit score decrease after filing a consumer proposal?

By how much will my credit score decrease after filing a consumer proposal?

This is a difficult question to answer.

Your credit score, also known as a FICO score, is calculated according to the following factors and levels of importance:

• Your payment history, which is 35% of your score
• The amounts you owe, which is 30% of your score
• The length of your credit history, which is 15% of your score
• The amount of new credit you have, which is 10% of your score
• Your credit mix, which is also 10% of your score

These factors will vary from person to person. Therefore, it’s difficult to predict how much your credit score would decrease after filing a consumer proposal or bankruptcy.

Your FICO score is a number out of 850. Your credit history on the other hand, is essentially a transcript of what you’ve borrowed, what you’ve repaid on time and what you haven’t repaid on time.

A record of your consumer proposal will stay on your credit history for 3 years after it’s been paid in full or 6 years after it’s been filed, whichever comes first.

A record of bankruptcy on the other hand will stay on your credit history for 7 years. A record of any subsequent bankruptcy will stay on your credit history for 14 years.

Therefore, from the standpoint of your credit history, there is a clear advantage in filing a consumer proposal instead of a bankruptcy, particularly if you’ve previously been bankrupt and want to avoid a bankruptcy on your history for another 14 years.

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Rebuilding Your Credit Score After A Consumer Proposal

Although you have up to 60 months pay your consumer proposal in full, you have the option of paying it off faster if you are able to. The more quickly you pay off your proposal, the more quickly it’ll be removed from your credit history.

For example, if you file your consumer proposal on November 2023 and it’s paid in full by November 2024, a record of your proposal stays on your credit history until November 2027.

Also, you can start rebuilding credit score immediately after your creditors approve your consumer proposal, which generally takes 45 days after the day you file your proposal. The best method for accomplishing this is described in this video:

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    • If your goal is to eventually apply for a mortgage to purchase a home, lenders generally use a 2/2/2 rule: 2 years discharged, 2 new accounts, $2,000 minimum limits with good repayment history. The easiest way to start is to obtain a secured credit card. Because your credit utilization rate is a major factor in your score, try to get card with a moderately higher limit (e.g. $2,000) – using a card with too low a limit will be of limited use in rebuilding your score.
    • Use your credit card consistently – use it for everyday purchases and pay off the balance in full at the end of the billing cycle. By doing this, you’re reestablishing your payment history. Doing this over a long period of time will gradually increase your credit score since the length of your credit history contributes to your credit score.

Our Promise To You

If you want to work with a Trustee who will give you confidence and peace of mind that your consumer proposal is being dealt with in a professional manner, look no further.

Contact Fong and Partners Inc., one of the 3 Best Rated Trustees in the Greater Toronto Area.

Phone: 416-260-3264



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