5 Tips to Rebuild Your Credit After Insolvency

Introduction: Why Credit Rebuilding Matters

If you’ve recently filed a consumer proposal or gone through bankruptcy, you’re not alone—and you’re not stuck. Thousands of Canadians take these steps every year to regain control of their finances. While insolvency provides relief from overwhelming debt, it does impact your credit score. That can feel discouraging, but here’s the good news: you can rebuild your credit faster than you think.

A healthy credit score opens doors to better borrowing terms, lower interest rates, and even opportunities like renting an apartment or qualifying for a mortgage. Rebuilding takes time and consistency, but with the right plan, you can start seeing progress within months.

Credit Scores: Why They Matter

Your credit score is more than just a number—it’s a snapshot of your financial reliability. Lenders, landlords, and sometimes even employers use it to gauge risk. A strong score can lead to:

• Lower interest rates on loans and credit cards

• Access to premium credit products

• Mortgage approvals with better terms

• Lower insurance premiums in some provinces

• Employment opportunities in certain industries

How Credit Scores Are Calculated

In Canada, Equifax and TransUnion are the two main credit bureaus. While their scoring models differ slightly, most credit scores are influenced by:

• Payment History (≈35%) – On-time payments are critical.

• Credit Utilization (≈30%) – How much of your available credit you’re using.

• Length of Credit History (≈15%) – Older accounts help.

• New Credit (≈10%) – Too many recent inquiries can hurt.

• Credit Mix (≈10%) – A variety of credit types is positive.

Impact of Insolvency on Your Credit

Filing a consumer proposal or bankruptcy will negatively affect your credit score. Here’s what you need to know:

• Consumer Proposal: Stays on your Equifax report for 3 years after completion.

• Bankruptcy: Typically remains for 7 years after discharge, depending on the province and bureau.

This doesn’t mean you can’t rebuild until those records disappear. Positive actions—like paying bills on time and managing credit responsibly—start improving your score immediately.

Rebuilding Your Credit After Insolvency

Once your consumer proposal is completed or your bankruptcy is discharged, rebuilding your credit should be a top priority. It’s not about quick fixes; it’s about consistent habits that demonstrate financial responsibility.

Here are five proven tips to help you get back on track:

1. Monitor Your Credit Report Regularly

Your first step is knowing where you stand. Request your free credit report from Equifax and TransUnion (you can do this online or by mail). Review it carefully for:

• Errors or inaccuracies – Incorrect balances, accounts that don’t belong to you, or outdated statuses.

• Proposal or bankruptcy updates – Ensure accounts included in your insolvency are marked correctly.

If you find mistakes, dispute them promptly with the bureau. Accurate reporting is the foundation for rebuilding.

Pro Tip: Set a reminder to check your credit report every 6–12 months. This helps you catch issues early and track your progress.

2. Pay Bills on Time—Every Time

Payment history is the single most important factor in your credit score. Even one late payment can set you back significantly.

• Automate payments for recurring bills like utilities and phone service.

• Set calendar reminders for due dates on credit cards and loans.

• Pay early if possible—5–7 days before the due date adds a buffer.

Consistency is key. A year of on-time payments can make a dramatic difference in your score.

3. Reduce Your Debt and Manage Utilization

Credit utilization refers to how much of your available credit you’re using. High utilization signals risk to lenders and lowers your score.

• Aim for 30% or less of your total credit limit. For example, if your limit is $1,000, keep your balance under $300.

• Pay balances in full each month if possible.

• Focus on high-interest debts first—this saves money and improves your utilization faster.

If you use your card frequently, consider making mid-cycle payments to keep reported balances low.

4. Consider a Secured Credit Card

If you don’t qualify for a traditional credit card yet, a secured card is a great option. Here’s how it works:

• You provide a refundable deposit (usually $200–$500) as collateral.

• The card functions like a regular credit card—use it for small purchases and pay on time.

• After 12 months of responsible use, many lenders will return your deposit and may upgrade you to an unsecured card.

A secured card helps you build positive payment history and demonstrates creditworthiness.

5. Keep Old Accounts Open

Closing old accounts can hurt your score by shortening your credit history and reducing your available credit (which affects utilization). If you have older accounts in good standing:

• Keep them open—even if you use them sparingly.

• Make a small purchase occasionally to keep the account active.

The longer your credit history, the better for your score.

Bonus: Common Myths About Credit Rebuilding

Myth 1: You can’t rebuild until the insolvency record disappears.
False. Positive actions start improving your score immediately.

Myth 2: Closing accounts improves your score.
False. It often does the opposite by reducing available credit and shortening history.

Myth 3: Carrying a balance helps your score.
False. Paying in full is best—interest costs you money and doesn’t boost your score.

Practical Timeline for Rebuilding

• Month 1–3: Pull your credit reports, dispute errors, set up payment automation.

• Month 4–6: Open a secured card, keep utilization under 30%, pay on time.

• Month 7–12: Maintain consistency, consider a limit increase or unsecured card if eligible.

Ready to Take Control?

Rebuilding your credit after insolvency is absolutely possible. It takes patience, discipline, and the right strategy—but every positive step counts.

If you’re struggling with debt or want personalized advice on rebuilding your credit, request a call back today. Our team is here to help you start fresh and move toward financial confidence.

Need Help? Visit our Contact Page.