Mortgage Requirements After Bankruptcy and Consumer Proposal

The recent economic times meant that Bankruptcy or Consumer Proposal was a difficult but necessary solution for some. Job loss, illness or divorce among the most frequent reasons for both. The huge monthly obligations can make it impossible for a person to continue to pay. Not to mention the calls from creditors and collection companies.

Often people are afraid to enter into Bankruptcy or Consumer Proposal because they fear losing their home. In many cases the home can be maintained and after the Discharge of the Bankruptcy or Consumer Proposal, the rebuilding of credit can begin right away. It’s been said that you have to wait 7 years before rebuilding credit, but that’s not so.

It’s possible to start getting back on your “financial feet” the day after discharge. You can rebuild your credit through the use of secured borrowing. This is generally a credit card that allows you to put up money as security in order to be granted credit in the same amount. This limits the risk to the lender or credit card provider and allows you to rebuild credit right away. Your Mortgage Agent can offer guidance with this option.

After several months of using and paying faithfully, you will generate a Beacon Score. This is the measure of your credit worthiness. There are two credit-reporting agencies in Canada, Trans Union and Equifax. It’s crucial to make each payment on time after a Bankruptcy or Consumer Proposal, since lenders want to see that you are now paying your obligations as agreed.

One of the best ways to rebuild your credit is to use your secured credit to buy things such as gas. Then with the help of on-line banking, you can pay that balance off each week. The frequent use and re-payment will trigger a Beacon Score sooner. Remember if you have a new source of credit, such as a card with a $1000.00 limit and you carry a balance over $500.00 you may actually see your credit score go down.

Once you have established a Beacon Score by using the secured credit, you should ask for an RRSP loan in the amount of two or three thousand dollars from your bank. They will hold the security of the RRSP as collateral for the loan and you can continue to further rebuild your credit.

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