How To Rebuild Your Credit

Going through a consumer proposal or bankruptcy can feel like a financial setback, but it doesn’t mean your credit is ruined forever. With the right steps, you can rebuild your credit score and regain financial stability faster than you might think.

Consumer Proposal vs. Bankruptcy: What’s the Difference?

If you’re facing financial challenges or working to repair your credit after a consumer proposal or bankruptcy, it’s important to understand how each one affects your financial future.

Consumer Proposal

A legally binding agreement with your creditors to reduce the amount you owe and create a structured repayment plan (typically over 3–5 years). You keep your assets, and once completed, your remaining debt is forgiven.

Bankruptcy

A legal process that eliminates most debts, but it comes with more severe consequences, including losing some assets and having a longer impact on your credit score (6-7 years after discharge for a first bankruptcy).

Which is better? A consumer proposal is often the preferred option if you can afford partial repayment since it has less impact on your credit than bankruptcy. However, bankruptcy may be the only option for those facing extreme financial hardship.

Regardless of which path you take, you can rebuild your credit. Here’s how to get back on track.

Check Your Credit Report for Errors

Credit report mistakes are common and can hold you back.

Get your free report from Equifax and TransUnion.
Look for errors like accounts that should be closed or incorrect late payments.
Dispute mistakes online to have them removed.

➡ Expected Score Boost: Varies, but correcting an error could improve your score instantly.

Get a Secured Credit Card

Most traditional credit cards won’t approve you immediately after a consumer proposal, but a secured credit card is an easy way to start rebuilding.

Example: You put down $500 as a deposit, and the lender gives you a $500 credit limit.

Keep your balance low (under $150 at any time) and always pay it off in full.
Even small purchases, like $50 in gas per month, help rebuild your score.

➡ Expected Score Boost: 30-50 points in the first 6 months if used correctly.

Make Every Payment On Time, Every Time

Payment history makes up 35% of your credit score, so paying bills on time is crucial.

Example: A missed $100 phone bill can lower your score by 30-50 points!

Set up automatic payments for things like:

Cell phone bills
Utilities
Rent (if your landlord reports payments)

➡ Expected Score Boost: A steady increase of 10-20 points per month with consistent on-time payments.

If your credit is still recovering, you can also ask your lender about alternative credit reporting. Some lenders accept non-traditional credit history, like monthly subscriptions and streaming services.

Keep Credit Utilization Low

Credit utilization refers to how much of your available credit you use. The lower, the better!

Example: If your credit limit is $1,000, try to keep your balance below $300 (30%) to demonstrate responsible use.

Tip: If possible, request a credit limit increase after 6 months of good payments. It lowers your utilization ratio!

➡ Potential Score Boost: 10-50 points within a few months.

Consider a Credit-Builder Loan

Some banks and credit unions offer small loans designed to help rebuild credit. These work by having you make payments into a savings account, which is then released to you after full repayment (building both savings and credit).

Example: You take a $1,000 loan at 5% interest, with a $90/month payment over 12 months. Your payments are reported to Equifax and TransUnion, boosting your score.

➡ Expected Score Boost: 50+ points after 6-12 months.

Adjust High-Interest Debt

If you still have high-interest debt, consider debt consolidation or negotiating lower interest rates to make repayment easier.

Example: If you have a credit card with a $3,000 balance at 19.99% interest, your minimum payment could be $90/month, but most of that goes to interest. Moving it to a line of credit at 7% interest could cut your payments and help you pay it off faster.

Keep Old Accounts Open

Keeping an account open maintains your credit age, which can improve your score over time. The longer your credit history, the more credibility you build with lenders.

If you have a low-limit credit card from before your bankruptcy, keep it open (even if you don’t use it often).