As soon as you file a consumer proposal, your credit rating will be revised to either an R7 or an R9 and it will probably remain at this rating until the proposal is completed.
After you complete your proposal payments, a note indicating you have filed a consumer proposal will appear in your credit record, typically for three more years. That means that your consumer proposal affects your credit record for up to eight years from the date that you filed the proposal to creditors, depending on the length of your payment period.
For example, if you make a proposal where you are making monthly payments for three years, the proposal remains on your credit report for a total of six years.
Should I worry about the effect on my credit rating?
Obviously, an R7 rating in a consumer proposal is much worse than a perfect R1 credit rating, so that is an obvious disadvantage of filing a consumer proposal.
However, if you are considering filing a consumer proposal, you probably already have less than perfect credit. You probably are either worried about falling behind on your payments, or you are already behind and worried about collection calls and wage garnishments. Your credit has already deteriorated to the point that you don’t qualify for a debt consolidation loan.
While a consumer proposal has a negative effect on your credit score, it also means that you have dealt with all of your debts. You have a plan in place to deal with your creditors. You are no longer worried about collection calls and wage garnishments. You can sleep at night.
A consumer proposal is a great solution for many Canadians struggling to get out of debt who have some income. Each situation is different so we suggest you contact a Licensed Insolvency Trustee to arrange for a no-charge initial consultation to review all of your options.