Life After a  Consumer Proposal – Can I ever qualify for a credit card? 

Can I ever qualify for a credit card? 

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By Taz Rajan | Reading time: 6 minutes | 1239 words

You may have just completed a Consumer Proposal, you may be in the middle of one, or you may never have heard of one. Let’s start by explaining what it is. In a nutshell, a Consumer Proposal is a legally binding debt forgiveness option, where you pay your creditors a portion of what you owe, with no interest. The agreed amount is to be paid back over a period as long as five years, and creditors are required to stop any collection actions (from phone calls to legal proceedings) as soon as you file a proposal. Only Licensed Insolvency Trustees are federally legislated to administer Consumer Proposals and they will develop the arrangement, and conduct any negotiations involving you and your creditor(s). 

We are in a consumer-based society, and we need credit cards for basic things like renting cars or booking hotels – now that we can all travel a little bit.  I have heard lots of myths and rumours that if you sign into a Consumer Proposal it will ruin your credit rating and you will never be able to qualify for credit again. Rest assured, this is a myth, which we will dispel here.  

You absolutely can and will rebuild your credit during and after your consumer proposal.  We have hundreds of clients that have gone on to have better credit scores than ever, buy homes, and get credit cards. We can help you do the same. There are also several videos about factors that can impact on your credit score quickly. 

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What Happens to My Credit When I Sign into a Consumer Proposal? 

Many actions impact our credit score and credit reports, such as making late payments, carrying high balances, and being the subject of collection activities. Other activities also have an impact: liens, credit counselling, debt management programs, consumer proposals and bankruptcies.  The key is to understand which option is best for your situation, and how to rebuild your credit after executing that option.  

All of your reported credit (utility bills, loans, and credit cards, for example) shows on your credit card, and has a rating. Revolving credit (credit cards, lines of credit - anything where you can use credit, pay it down and have more credit available again) will have a range from R1 having the most positive impact on your score (showing that you pay that credit option within the month) to R9 which has the most negative impact, indicating bankruptcy.  Any payment arrangements, including credit counselling, debt management programs, Orderly Payment of Debt and Consumer Proposals, are rated as an R7.   

The chart below is a great picture of how various actions affect our credit score and how long they remain on the credit report.  


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How soon can I apply for credit? 

The great news is you can rebuild and improve your credit score and qualify for best rates and terms within 2 years from taking action  

In a consumer proposal, you can apply and be approved for some types of credit shortly after you file and while you are working through the proposal.  For example, you can apply for vehicle financing with companies that specialize in working with clients that sign into a consumer proposal.  Reputable vehicle financing companies (such as those who are Bromwich+Smith Partners) offer newer model vehicles and competitive interest rates, and help you avoid losing money on the vehicle financing (negative equity).   

Credit report expert Richard Moxley shares that the best and fastest way to increase your credit score is with a credit card.  Keep in mind that a prepaid credit card does not build credit, and learn more about the many secured credit card options in the market now which do.   

Once you have paid off your consumer proposal and attended your two counselling sessions, you will receive a certificate of completion.  If you were also utilizing a car loan and/or secured credit card for at least 2 years during your proposal you will be able to qualify for a credit card with best rates and terms.  “I have a mortgage at a very competitive rate, two credit cards and my credit score is higher than it’s ever been, even before filing into my consumer proposal.” – anonymous client.   

That is hopeful and proof that there certainly is credit after consumer proposal. If are thinking about a mortgage after consumer proposal, learn more here

One of the principles of the insolvency act is rehabilitation of the individual, and by being able to rebuild credit that principle is upheld.  

What are some tips to rebuild credit after signing into a Consumer Proposal? 

  1. Do not wait until you complete your consumer proposal, start as soon as you sign in with a car loan or 2 secured credit cards. 

  1. Take the information and tips you learn in your counselling sessions and apply them to the new credit products. 

  1. Keep your balances below 50% of the limit by paying off your credit card in full, or at least make your minimum payments on or before the due date. 

  1. Monitor your credit report, check for errors, and take action immediately if you find any. 

  1. Learn how credit works and how your credit report works so you can master this -link to our webinars. 

What if there are errors on my credit report after I complete my Consumer Proposal? 

Sometimes a consumer proposal will show up as a bankruptcy on your credit report or will not drop off after 3 years as it is supposed to.  Check your credit report regularly, at least once per year.  This can be done for free through the two Canadian credit reporting agencies: Equifax and Trans Union. You can also check your report through your bank or a third party (read all the fine print).  If you see an error, immediately deal with it by reaching out to Equifax, Trans Union or a credit report expert

consumer proposal is an excellent alternative to bankruptcy.  It provides legal binding protection from your creditors in that, once signed, they can no longer call, send demand letters, engage in collection activities, place a lien or garnishment, or take you to court.  Your assets are protected and as you can see, your credit score is no worse off than it would be with a debt repayment program, Orderly Payment of Debt, credit counselling or collections.  The best part is, you absolutely can rebuild your credit and qualify for best rates and terms with new credit during and after your consumer proposal.   

The fear of the unknown often makes us freeze and avoid acting.  Now that you are armed with this knowledge, take action to get that debt behind you. Get that overwhelming and crushing debt off your back so you can thrive again.   

No matter how difficult or complicated your financial situation may seem, there are options available to help you rebuild and thrive. Our Debt Relief Specialists are available by phone at 1.855.884.9243, or you can request a call back via our contact us page. There is no need to travel to a local office. Licensed Insolvency Trustee, Bromwich+Smith, is now offering video appointments, with all services available from the comfort of your home.   


Taz Taz Rajan 

Taz is a Community Engagement Partner at Bromwich+Smith and has been in the finance industry for nearly two decades and has always been passionate about education and empowerment. 
Having declared bankruptcy herself, she intimately understands the shame, stigma surrounding matters of debt as well as the joy and relief that comes from restructuring. Taz actively works to normalize the conversation of debt through blogs, media interviews, webinars, lunch & learns and through building relationships.


Related blog:  

Consumer Proposal: Alternative to Bankruptcy| Bromwich+Smith ( Can Get a Mortgage After a Consumer Proposal? ( 
Buying a Car during a Consumer Proposal | Bromwich+Smith ( 
How many times can you file a consumer proposal? ( 
Consumer Proposal - Can it Help Avoid Bankruptcy? ( 
How does Credit work in Canada? |Bromwich+Smith ( 
Tips to Improve Your Credit Score Fast | Bromwich+Smith ( 


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