How Does Bankruptcy Affect My Credit Rating?

Category: Personal Bankruptcy (14) comments

credit rating and bankruptcyYour 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:

  1. Understand what factors affect your credit score beyond just your bankruptcy;
  2. Build up your savings (to use as a security deposit or down payment if needed);
  3. Pay all of your regular bills on time, and then;
  4. 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.

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  1. Curious

    I have been discharged from bankruptcy (1st time) about a year ago. I have pulled my Equifax credit report and see that the accounts that were included in bankruptcy still showing as revolving accounts open with balances owing and it’s showing 94% utilization. Should these amounts still show as amounts owing? Or should the amount owing be 0? Some of the other accounts included in the bankruptcy show amounts owing as $0.

    Please advise.

    Thanks in advance.

    1. Ted Michalos Post author

      The first thing you should check is to see whether or not your trustee has completed your file and been discharged from your bankruptcy too. It is a little confusing, but first you get discharged, then your debts are discharged, and then your trustee is discharged. When your debts are discharged is when your credit bureau will be updated. Without knowing the particulars about your bankruptcy, I cannot tell you if your file should still be open a year later. That’s not usually the case, but it is not uncommon.

  2. Concerned

    Similar to the comment from Curious. I was discharged in 2011 and I have my certificate of discharge. I am able to improve my credit but it still drops every time an old account reports on my credit. On my Equifax the Status of these accounts says : Bad debt, collection account or unable to locate. Date of last activity: 2010-10. Date reported: 2015-01. Shouldn’t these lenders from my past stop reporting on my credit bureau? How can I stop this?

    Thank you.

    1. J. Douglas Hoyes

      Concerned: Yes, those lenders should stop reporting new information on accounts that were discharged in your bankruptcy. I would suggest that you contact your trustee to confirm that the creditor in question received notice of your bankruptcy; if not, they should be notified. Then, contacting the creditor and Equifax and asking them to correct the information is advisable.

  3. Victor B.

    I was discharged from bankruptcy on Dec. 19, 2006. I was told by my trustee to notify Equifax which I did in Jan. of 2007. She did not tell me about Trans Union. (I didn’t know that there were two credit bureaus in Canada at that time).

    Did the government bureau of bankruptcy notify Trans Union and Equifax about my discharge in Dec. of 2006?

    1. J. Douglas Hoyes

      Victor: you do not need to notify the credit bureaus. The Office of the Superintendent of Bankruptcy notifies both Equifax and TransUnion about your bankruptcy, and your discharge. A first bankruptcy remains on your credit report for 6 years from the date of discharge, so since more than six years has passed since your discharge I would assume that your bankruptcy no longer appears on your credit report.

  4. Kathy C.

    My bankruptcy is 15 years old now and just lately I have had an RBC loans officer bring it up and ask me questions about the bankruptcy. Is this legal? I have had numerous loans which I paid off and a 8 year old mortgage with RBC and never had a problem before now. She is attempting to affect my rate of interest on a small loan. Should I talk to her superior or is this allowed. Thank you.

    1. J. Douglas Hoyes

      Hi Kathy. Whether or not it is legal, it doesn’t make any sense that a loans officer would be asking you about something that happened 15 years ago. Assuming you were discharged, your bankruptcy doesn’t even appear on your credit report. To answer your question, yes, I would suggest you talk to her superior and ask why something that happened 15 years ago is relevant today, particularly given that you have a more recent history with the bank where you have paid off loans, which should be much more relevant to them in making their decision.

  5. pat

    i filed my bankruptcy 4 months ago, but until now one of my creditors is still taking out money from my bank account. Is this right? its a revolving loan.

    1. J. Douglas Hoyes

      If the creditor is included in your bankruptcy, they should not be taking money out of your account.

      I advise everyone who files bankruptcy to open a new bank account at a new bank, so that an existing creditor no longer has access to your bank account. You should do that immediately. You should also discuss this with your trustee.

  6. Questions

    I declared bankruptcy in Auguat 2018. I was making my monthly payment to my trustee on time but had missed my last payment (9th month) Due to me having to go on disability and not recieving any form of income for some time. My bankruptcy was still discharged, will this affect me or my balances on my credit bureau?

  7. Wondering

    On Equafax and Transunion all accounts say they were included in my bankruptcy but they also show a balance and show a charge off and write off. Is this normal? Should I have them showing as zero balance since I don’t owe anything? And why would they say they were charged off or written off when they were included in the bankruptcy?

    1. J. Douglas Hoyes

      Each creditor reports differently; in their system they have “charged off” the file because of the bankruptcy. I suggest you book a meeting with your trustee, and bring your two credit reports with you, and they can review them and ensure that everything is being reported correctly.


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