Bankruptcy risks lowering your credit score to the lowest possible score in most Canadian credit bureaus. This means that lenders, insurers, homeowners, employers, and utility companies are less inclined to extend credit until your bankruptcy disappears from your file, which usually takes six to seven years to complete. a first bankruptcy.
What is a credit rating?
Your credit rating is derived from your credit report, which contains information about your credit balances, your limits and your payment history (late payments, defaults, balance ratios), as well as personal information such as your occupation and your professional background.
Wingfax, Canada’s largest credit bureau, uses a simplified scale from R1 to R9 – R1 being a perfect score -, while LightUnion measures credit scores on a scale of 300 to 900, 650 being generally considered as the dividing line between good and bad credit. Filing for bankruptcy will likely lower your credit rating to the lowest level.
How Does A Low Credit Score Affect Me?
You may think that your credit rating is a theoretical number that has no impact on your daily life, but this is not entirely true. Lenders and other creditors use your credit score to determine your credit worthiness. The lower your score, the less likely you are to get credit, which can range from a store credit card to a personal loan or mortgage. It can even affect your ability to get a job if your potential employer requests permission to check your credit report.
How long will bankruptcy stay on my credit report?
The declaration of bankruptcy is a serious step to take, and this seriousness is reflected in the period for which it remains on your file. Wingfax keeps your first bankruptcy on file for six years from the date of your discharge; LightUnion maintains it for six or seven years depending on your province or territory of residence.
If at any point you file a second bankruptcy, both offices will keep it on your credit file for 14 years from the date of discharge.
Is Bankruptcy The Right Solution For Me?
If you think you need to declare bankruptcy, it’s time to speak to a licensed insolvency trustee, who will explain the bankruptcy process in detail and assess your situation to see if you might be able to consider other options than bankruptcy, like debt consolidation or consumer proposal.
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