Re­build­ing Credit af­ter Bank­ruptcy

The Victoria Standard - - Business - with Mar­i­anne Steele-mac­sween MAR­I­ANNE STEELE-MAC­SWEEN, LIT

“Will I ever be able to ob­tain credit again af­ter bank­ruptcy?” This is the most com­mon con­cern my clients have when they are faced with fi­nan­cial hard­ship. The short an­swer is yes, you can re­build your credit, but it does take time and pa­tience.

Why is credit im­por­tant? Credit al­lows you to bor­row money from fi­nan­cial lenders to make large pur­chases, like your home or ve­hi­cle.

You can es­tab­lish credit through­out your life by keep­ing bank ac­counts in good stand­ing, mak­ing pay­ments on credit cards on time and by re­pay­ing your loans.

A credit score, also known as a bea­con score, is the key to ob­tain­ing credit. A credit score over 650 is con­sid­ered healthy. Credit grantors lend money and set in­ter­est rates based on your credit score, so the higher your score, the less in­ter­est you pay.

Af­ter bank­ruptcy, your credit score will be very low or you will have no score at all. This means that you have to re-es­tab­lish your credit.

If you’re re­cov­er­ing from bank­ruptcy, here are the steps you need to take to re­build your credit:

1. File a copy of your Cer­tifi­cate of Dis­charge.

Your Cer­tifi­cate of Dis­charge (re­lease from bank­ruptcy) must be filed with the two main cred­i­tor bu­reaus – Equifax and Trans Union Canada. You must re­quest that they up­date your record with this in­for­ma­tion.

2. Re­quest a copy of your credit re­port.

Equifax and Trans Union Canada are both credit re­port­ing agen­cies. They keep a record of your credit ac­tiv­ity. You should re­quest a copy of your credit re­port to make sure that ev­ery­thing in your bank­ruptcy is up­dated correctly on your credit re­port.

3. Es­tab­lish credit.

The world of credit has changed and now cred­i­tors are look­ing for re-es­tab­lished credit with a to­tal com­bined limit of $5,000 af­ter bank­ruptcy. There are two types of credit af­ter bank­ruptcy: re­volv­ing (credit cards) and in­stall­ment (per­sonal loans).

One of the easi­est ways to re-es­tab­lish credit is to ob­tain a se­cured credit card, which is a credit card that is backed by a se­cu­rity de­posit us­ing your funds.

Ev­ery time you use the credit card, it is re­ported on your credit re­port which will be­gin the process of re-build­ing your credit. It is rec­om­mended that the se­cured credit card be used only to pur­chase items within your bud­get. All items should be paid for im­me­di­ately- do not carry a bal­ance. The pur­pose of ob­tain­ing the card is to reestab­lish your credit and not spend be­yond your means.

The sec­ond type of credit is called in­stall­ment credit, which is ob­tained through a loan with set in­stall­ment pay­ments.

4. Have pa­tience. If you ex­pe­ri­enced fi­nan­cial hard­ship, it’s easy to be­come frus­trated. Un­der­stand that the process to re-es­tab­lish credit takes time. Have pa­tience with your­self. Use this time to get your fi­nances in or­der and build pos­i­tive habits that will keep your fi­nan­cial health on track for the fu­ture.

Credit is a priv­i­lege and needs to be nur­tured with care, skill and due dili­gence.

If you have any ques­tions on this topic or debt re­lief, I in­vite you to email me at

For more than 30 years, Macken­zie, Gil­lis, Mac­dou­gal Inc., Li­censed In­sol­vency Trustee, op­er­at­ing as MGM Trustee, has helped thou­sands of peo­ple take con­trol of their fi­nances. With mul­ti­ple lo­ca­tions through­out Cape Bre­ton, our com­pas­sion­ate, knowl­edge­able and ex­pe­ri­enced team is here for you.

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