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Bankruptcy vs Consumer Proposal and How They Affect Credit

By Darrell Pauls

Bankruptcy vs Consumer Proposal and How They Affect Credit

If you are struggling with debt and need help, but are concerned about where that help will leave your credit rating then keep reading as we discuss how a bankruptcy or consumer proposal will affect your credit in today’s post.

Your Credit Rating

When you use any kind of credit you are agreeing that you will pay back the amount of money you used within the set amount of time laid out beforehand by the creditor. If you are good about making your payments on time you will have a better chance at having a good credit rating than if you miss payments or are often late making your payment. Your credit rating is important as banks and other lending institutions will look at that number and decide whether or not they will lend money to you. If you have a good credit rating they will see you as a person who is likely to make their payments and will then be more likely to take a chance on lending you money.

What Do The Numbers Mean?

Lenders will rate of each of your credit history items on a scale of 1-9. The number “1” being that you pay your bills within 30 days of when they are due. Numbers 2-5 represent how many months your bill was passed due. For example an R4 would mean that your bill is or was 4 months overdue. An R7 rating means that you have done a consumer proposal and or you are making payments through an agreed arrangement to pay off your debt. An R8 is given when repossession has taken place, such as a car repossessed and sold, to pay off the loan.  An R9 means that you have declared bankruptcy or your debt has been put into collection. This is the worst score on your credit rating.

When you file for bankruptcy and get an R9 on your credit rating, that will stay on there for six years after the bankruptcy is discharged as long as this is your first bankruptcy. It can stay on for fourteen years if it is a second bankruptcy.

If you file a consumer proposal an R7 is placed on your credit rating for three years after your last payment has been made, normally round 8 years in total.

If You Are Concerned About Your Credit…

4 Pillars Consulting Group has been helping Canadians restructure debt for more than 15 years and we have one of the highest success rate in the industry. Over 97% of our clients complete the plans that we create for them and become debt free. We know that your credit rating is important to you, that is why we work with our clients to rebuild their credit as quickly as possible.


4 Pillars has an exclusive program for our clients called the credit acceleration loan program in partnership with the Phoenix Fund, which when approved pays off your consumer proposal and causes your consumer proposal to be off of your credit rating in 3 years vs the standard 8 years it normally takes.

To learn more about how 4 Pillars Red Deer can help you rebuild your credit and get you back on track, give our office a call at 403-755-1757 and schedule a free one hour consultation with one of our consultants. We will take a look at your individual situation and provide you with options that are in your best interest.

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