If you opt to file a consumer proposal, you essentially are letting the creditors know you can't pay back the money you borrowed. The biggest problem with filing a consumer proposal is the damage it does to your credit score because it could possibly earn you an R7 or R9 rating. You have to carefully look at the current damage to your score to decide if you want to move forward with the proposal. The following are some things you should know before you proceed:
Should You Be Worried About the Impact on Your Credit Rating?
One of the obvious disadvantages of a consumer proposal is the negative impact on your credit rating. If you have decided to file, however, chances are that your credit is already poor. You may also be dealing with collections or wage garnishments. Although a consumer proposal will impact your credit negatively, it signals that you are taking care of your debt. It will help you create a plan to help work with your creditors and prevents further action.
How Can You Rebuild Your Credit After Your Consumer Proposal?
One common question is how long it will take before your credit is repaired. The best way to repair your credit is to borrow more money. However, this is not always ideal if you have a problem with debt. Still, you have to get back into a pattern of responsible borrowing.
To do that, one of the first things you should do is set a budget. Your trustee will help you create an income and expense statement. You have to then use it to track your spending. The goal is to set aside enough money for your monthly expenses. Also, have some extra money set aside for emergencies.
Next, establish one or two new credit lines. This may be difficult at first, so wait a little while after your proposal before you apply. You can use either revolving credit or installment credit. Revolving credit is offered through credit cards or lines of credits offered by banking institutions. Installment credit is like a traditional bank loan where you borrow a sum and repay it over time. Once you have established new lines of credit, you will begin to notice your credit rating increase.
Make Your Payments on Time
Once you have set a budget and established new credit, you need to make your payments regularly. Timely payments on your cell phone bill, utilities, and debt payments are crucial to repairing your credit. If you fail to do so, you will find yourself in the same position once again.
Contact a consumer proposal secured debt service for more information.