There are guidelines that need to be followed but you could re-enter the credit market within months of the formal discharge.
Mortgage Lenders have the requirement that you must be discharged for 2 full years and have at the very least 1 full year of clean re-established credit in the amount of $2500.00 to $5000.00. Now you may be saying, that’s all good and well, but no on will extend credit to me.
Here’s how to begin.
- Set up on-line banking with your regular bank. This will assure that you can pay your bills as soon as you receive them. Remember that late payments after Bankruptcy or Consumer Proposal are not acceptable to future lenders. It also causes you to begin again with re-establishing the credit from the date of the last late payment.
- Next you should apply for a secured credit card. A deposit must be provided, but you will be approved for a small balance of $250.00 to $500.00, even right after your discharge. Companies like Capital-One offer this service and report to the credit bureau.
- Home Trust Company will give a limit of up to $10,000.00 with a deposit of up to $10,000.00 and they report to the credit bureau each month. This helps re-establish a Beacon or credit score right away. After 1 year of impeccable payments you can request a return of your deposit.
- About 4 months after establishing the secured credit card, you should talk to the bank where you have a relationship (avoid asking a bank that was involved in the Bankruptcy or Consumer Proposal) as they will not be permitted to lend to you. You should request an RRSP loan in the amount of $2000.00 or higher if they will allow it. The bank will have the security of the RRSP and you will have a second source of re-established credit with a national institution. Having credit other than a credit card is vital.
- You may also have the need for a car and there are firms that will finance a vehicle post-Bankruptcy or Consumer Proposal, but the fees can be extremely high. As long as the amount of the loan is small it could still be an option. But be wary that you don’t create a new financial difficulty.
Once you have followed these steps you will be back on your financial feet and you will be able to buy a home with as little as 5% down, provided you have provable income and are able to show that you have your closing costs from your own savings. It’s not easy, but why wait for seven long years before taking the first step to credit worthness? Don’t allow Bankruptcy or Consumer Proposal to keep you from Homeownership.