The Mortgage Doctor

Rebuild Your Credit after Bankruptcy or Consumer Proposal

It’s difficult enough going through a Bankruptcy or Consumer Proposal, but believing that it takes 7 yrs before you can become credit worthy is not true.

There are guidelines that need to be followed but you could re-enter the credit market within days of the formal discharge.

Mortgage Lenders have the requirement that you must be discharged for 2 to 3 full years (depending on the actual Lender) and have at the very least 1-2 full years of clean re-established credit in the amount of $5000.00.  Now you may be saying, that’s all good and well, but no on will extend credit to me.

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Here’s how to begin.

• Set up on-line banking with your regular bank.  This will assure that you can pay your bills as soon as you receive them. Remember that late payments after Bankruptcy or Consumer Proposal are not acceptable to future lenders.

• Next you should apply for a secured credit card. A deposit must be provided, but you will be approved for a small balance of $250.00 to $500.00, even right after your discharge. Companies like Capital-One offer this service and report to the credit bureau.

• Home Trust Company will give a limit of up to $10,000.00 with a deposit of up to $10,000.00 and they report to the credit bureau each month.  This helps re-establish a credit score right away. After 1 year of impeccable payments you can request a return of your deposit.

• About 4 months after establishing the secured credit card, you should talk to the bank where you have a relationship (avoid asking a bank that was involved in the Bankruptcy or Consumer Proposal) as they will not be permitted to lend to you.  You should request an RRSP loan in the amount of $2000.00 or higher if they will allow it.  The bank will have the security of the RRSP and you will have a second source of re-established credit with a national institution.  Having credit other than a credit card is vital.

• Lendit.com is a company that allows you to borrow to buy a GIC after Bankruptcy or Consumer Proposal and in the end you will have an investment as well as good re-established credit.

• You may also have the need for a car and there are firms that will finance a vehicle post-Bankruptcy or Consumer Proposal, but the fees can be extremely high.  As long as the amount of the loan is small it could still be an option.  But be wary that you don’t create a new financial difficulty.

Once you have followed these steps you will be back on your financial feet and you will be able to buy a home with as little as 5% down, provided you have provable income and are able to show that you have your closing costs from your own savings.  It’s not easy, but why wait for seven long years before taking the first step to credit worthiness? Don’t allow Bankruptcy or Consumer Proposal to keep you from Homeownership.

For more information please contact us using the form below, or Apply on-line now.