Your credit report is maintained by one of two major credit rating agencies in Canada: Equifax and Trans Union. When you apply for a loan, whether a credit card or a mortgage, your lender will review your credit report. This report contains information about whether or not you have unpaid bills, how much credit you have outstanding and even how many times you have applied for credit.
If you file for bankruptcy a note will appear on your credit report indicating that you have done so. This information is provided to the credit bureau by the federal Superintendent of Bankruptcy. Each month they provide a list to the credit reporting agencies of everyone who has filed bankruptcy in Canada or a consumer proposal. It is important to understand that it is not your trustee advising the credit bureau of your bankruptcy, or your discharge. Rather it is part of the process completed by the Office of the Superintendent of Bankruptcy. They also provide a list of people who have been discharged.
How Long Does Bankruptcy Stay On Your Credit Report?
According to Equifax, Canada’s largest credit reporting agency, a first time bankruptcy will appear on your credit report for six years after your date of discharge. This means if you are bankrupt for the minimum period of nine months, your bankruptcy will appear on your credit report for nine months plus six years, or almost seven years in total.
A second bankruptcy appears on your credit report for 14 years.
Bankruptcy And Your Credit Rating
Equifax uses a 1 to 9 scale, with perfect credit displayed as an R1; a bankruptcy is an R9. Your credit rating will be listed as an R9 for the six year period after your discharge.
Rebuilding Your Credit Score
Your ability to borrow is dependent on more than just one item on your credit report. A past bankruptcy is one factor, but a potential lender will review other factors including your income, work history, living situation, and other credit you have re-established.
If you want to rebuild your credit rating after bankruptcy, it is recommended that you do the following:
- Understand what factors affect your credit score beyond just your bankruptcy;
- Build up your savings (to use as a security deposit or down payment if needed);
- Pay all of your regular bills on time, and then;
- Gradually re-establish credit, perhaps with a secured credit card.
Over time you can rebuild your credit rating after bankruptcy. While you may be able to qualify for a secured credit card within one year, it generally takes two years or more to qualify for something as large as a second mortgage.
Ignoring your debts because you are worried about their impact on your credit score is not a good option. It is better to take action soon, so that you can begin the process of rebuilding your finances and then rebuilding your credit rating after bankruptcy.