A Horrible Credit Score After Finishing a Consumer Proposal Isn’t Necessarily Your Fault

Published: May 20, 2020 Last updated: September 7, 2023 at 13:14 pm

Why Your Credit History is So Bad After Completing a Consumer Proposal, and What You Can Do About It

Most people when finding out their credit score after completing a consumer proposal realize it is much lower than they thought it should be, considering they’ve successfully completed the process and fulfilled all the terms agreed to repay their debts.

What is a consumer proposal?

First off, if you’re new to what a consumer proposal is, here’s what it is:

A consumer proposal is an arrangement between you and your creditors which enables you to pay a portion of your debts over an extended period of time.

A proposal can run no more than five years and is often an attractive alternative to bankruptcy. The percentage your creditors will agree to accept depends on your unique circumstances. For people with high household income and assets, the percentage can be quite high.

Whatever percentage of your debts you agree to repay, you will not be charged interest on this amount – the result being you take an overwhelming debt problem, slash it down to say 30% of the original amount owing; eliminate the interest payments and get five years to repay.

Someone with $60,000 debts incurring interest at 19.99% may be very relieved to have this crushing debt load reduced to a $300 per month payment for five years.

So the question is, how long do bad things affect your credit score? We have a table below to help you out!

Equifax vs. TransUnion – How long will things stay on your credit history?

InfoEquifax (yrs)TransUnion (yrs)
Credit Counselling33
Consumer Proposal33
Collection, Lawsuit or Foreclosure
Collection, Lawsuit or Foreclosure
Late Payments66
Collection, Lawsuit or Foreclosure (PEI)106
Different financial outcomes will negatively or positively affect your credit history!

Most Credit Reports Are Chock Full of Errors After a Consumer Proposal

Sadly, if you are in or have recently completed a consumer proposal, chances are very high your personal credit history is full of reporting errors. Not just one or two small mistakes, but several serious errors which are likely hurting you quite a lot. These errors paint an overly negative picture of your use of credit and your repayment history, and they drag down your credit score substantially.

Importantly, this is NOT your trustee’s fault. It affects all trustees equally. And, it’s not your fault either.

It comes down to the way lenders and credit card issuers and collection agencies report to the credit agencies. The credit agencies are in the business of collecting information and packaging it for sale to the companies that need to assess your creditworthiness. They gather and report the information provided to them and trust it to be accurate.

Even if they wanted to, they don’t have the means to fact-check every single piece of data submitted to them. But fortunately, if it’s not accurate, they will allow you the opportunity to fix mistakes.


You knew your personal credit history would take a beating when you filed your consumer proposal – but it seemed like a price worth paying for the peace of mind of being able to meet your financial obligations each month. But after you’ve done the heavy lifting, you shouldn’t be penalized for other people’s mistakes or maybe even vindictive filing of false information.

So why does this happen?

Simply, most people don’t know how to read a credit report, don’t realize the errors are there or recognize an error when they see it, and have no idea what to do about it. And, they don’t realize that even a small number of serious mistakes can cost you 50 to 150 points on your credit score, and often thousands of dollars in increased costs.

Even though you had to attend two separate credit counselling sessions with your trustee during your consumer proposal, it is very unlikely they talked to you about these reporting errors or even reviewed your personal credit history with you. And even if they did, the mistakes that are costing you may not be obvious to them either.

Instead, the discussion was more along the lines of ensuring you are living your life within the framework of a balanced budget, and possibly handing you an application form for a secured credit card.

The result is almost everyone who finally completes their consumer proposal has an uphill battle trying to restore respectability and credibility to their personal credit history. And, the odds are stacked against them because reporting errors are systemic if you’ve previously had trouble paying your bills.

What Kinds of Errors Are In Your Credit Report After a Consumer Proposal?

It helps to start with an understanding of how your credit history is rated, as it quickly becomes apparent where the errors could be that hurt you.  Credit facilities are ranked on a scale from R0 to R9. R9 is the absolute worst rating possible, and R1 is what you should aspire to – it means you always pay on time and are never even 30 days late.

If you have filed a consumer proposal, most accounts are reported as R9 – which means bad debt, written off, or unable to locate. This is simply not correct if you have agreed to repayment terms with creditors and complete your proposal faithfully – they should be rated as R7, which is bad, but not so bad.

Some credit card issuers report your card as “Included in Bankruptcy”, also an R9, and also incorrect. We see this often with TD Bank and American Express.

A few credit card issuers seem to completely ignore the fact you filed a proposal. The day your consumer proposal was approved in court, you legally gained relief from your creditors, and both you and the creditors agreed to how those debts would be repaid. Yet these card issuers continue reporting ongoing late payments months, and years after your proposal was accepted and you’ve met the repayment terms.

It’s very common for loans, lines of credit and credit cards to continue reporting a balance owing. And these balances grow with each passing month. Often the balance being reported is greater than the original limit! Your credit score takes a beating if you have cards reporting over their limits. Especially when the balance should be zero – once the proposal is completed.

It’s also common to see unpaid collections from Collection Agencies in your credit report. These debts were probably included in the consumer proposal you filed, but for whatever reason, they never got properly updated.


Add a few of these things up, and it’s no surprise your credit score can make you look like a deadbeat who doesn’t pay their bills, even when you’ve been through a five-year process living on a tight budget to pay off your proposal, and not missed any payments or rung up new debts.

But don’t you think part of the rehab process should be a rebuild of your personal credit history? Does it have to stay really awful for six years or more?


So, how can you get these mistakes fixed and get the credit score that you actually should have and are entitled to?

Most Reporting Errors Won’t Be Removed Until After the Consumer Proposal is Completed

Neither credit reporting agency wants to make any changes to your personal credit report while you are still in your consumer proposal. The reason is there’s a chance you may not complete it. In fact, if you miss three payments during the term of your proposal it can be annulled. That said, I have found they will accommodate requests to fix the most egregious errors – like ongoing reported late payments even after the proposal was approved.

However, once the consumer proposal is completed, there is no longer any excuse not to fix questionable items; yet, these mistakes mean that it’s not uncommon to see a credit score in the range of 450 to 600 when people have successfully fulfilled everything they agreed to do.

And that’s a problem because if you were hoping to qualify for a new mortgage, that score is NOT going to cut it. It’s also not going to look good on a rental property application or if you wish to lease or finance a car. What’s worse is that even when your score is just good enough to qualify for these loans or leases, you will often end up paying a higher price because your score is lower than it should be.

These errors can also hurt your chances of securing decent credit cards or other loan products in your quest to rebuild your personal credit history.

In other words, you should be acting to fix mistakes on your credit history as soon as it is feasible to do so, and probably having your reports checked for mistakes as soon as your consumer proposal is completed.

How Do I Know If There Are Reporting Errors In My Credit History?

One silver lining of the COVID-19 crisis is both credit bureaus in Canada are allowing FREE online credit reports. No strings attached. You will receive a comprehensive report with all pertinent information, EXCEPT it will not show your credit score. This is a great opportunity for you to check and check for reporting errors.

You need to read the report carefully, taking notes as you go, looking for all things factually incorrect. At this point, you can launch your own investigation with the bureau; you will find their investigation forms on their respective websites. Then, send in the completed form, together with all documents you have to support your claim, and two pieces of ID (front and back).

If you get the package done right the first time, you may see your report updated in as little as one or two months. If you missed something, after they respond to you, you will start over and the clock resets. Some people are able to get this done eventually, and others give up in frustration. It can require patience and persistence to get through the hurdles.

The Big Question — Is the Hassle Worth It?

We see many people on an almost daily basis who hope to qualify for a new mortgage or wonder how long it will be before they get a clean bill of health after a consumer proposal. One of the first things we do is ask their permission to review their credit history to inspect it for mistakes.

We also offer a Credit Renovation service, which many opt to use, especially if they need a quick boost to their score to qualify for a home loan or get the best rates possible for a mortgage renewal. Here is a sampling from just the last couple of months of what types of improvements they’ve seen and the results achieved with a more accurate credit history.

Credit Renovation Results

   Credit Scores
Before    /   After
Al and Samantha
Paid off consumer proposal early, but still showed up on credit report. Had been trying to clear mistakes for several months.
With reporting errors gone, qualified for fantastic mortgage with 'A' lender at their best rate. Also were given a new line of credit.
Goal to get best rate for mortgage refi.
80 point bump in credit score allowed refinancing at lower rate, and lowered monthly payment by $676. Total saving over 3 year term is $24,936.
Completed consumer proposal early and 3 years ago. Affected tradelines were still being mistakenly reported on credit history.
With removal of errors, went from not qualifying for any mortgage, to getting a high ratio mortgage at lowest/best rates.
Alva and Arden
Goal to qualify for mortgage less than 1 year after completing consumer proposal.
Received best rate possible from 'B' lender, saving $323/month. Were also able to put $15,000 into rainy day savings account.
Credit renovation performed a few weeks after completing consumer proposal, with goal of best foundation for rebuilding credit.
Bump of 79 points.
Just completed proposal, goal of best foundation for rebuilding credit.
Bump of 89 points.
Student debt incorrectly reported more than 2 years after completing his consumer proposal. Was told a mortgage would be impossible with his credit history.
The student loan was completely removed from his report, and he qualified for a high ratio mortgage as first time buyer at best rates.
Goal to improve cashflow by combining first and 2nd mortgage into a single loan, 2 years after completion of consumer proposal.
Score bump of 62 points resulted in best terms possible from a B-lender. He is saving $362 each month on a $240,000 mortgage
Goal to qualify for a mortgage at a decent rate to pay off her consumer proposal.
Score bump of 76 points reduced mortgage cost, enabling early payoff of proposal. No CP payment + lower mortgage payment totaled to $1,239/month improved cashflow in her pocket!
6 months after completing proposal, goal to make credit history as solid as possible, and be ready to qualify for mortgage at lowest cost.
Score bump of 129 points means he qualifies for great mortgage rates (low 4% range) with a 'B' lender.
Helen and David

These score increases achieved within two days of submission!
Score bumps of 122 and 155 points mean they are already well positioned for a great mortgage with a 'B' lender.

The results speak for themselves and are pretty black and white. A better credit score not only means you will pay less for many things, but it can also be the difference between a yes and a no when it comes to getting a mortgage, having a rental application accepted, or being able to buy a new car.

About Fixing Credit Reporting Errors

Many services exist to “repair” your credit, but the majority are schemes to game the system. They will often try to challenge legitimate entries in your credit history to achieve a very short term gain which immediately bounces back after the challenge is dismissed, or recommend that you not pay creditors to force them to negotiate (resulting in a worse credit history with written off debts). There are many corners being cut, and the reporting agencies hate these services.

If you want it done right the first time, and you want it done quickly, there are only a couple of companies who really know what they are doing and can provide this service. Choose carefully to avoid long-term damage to your credit score.

Once mistakes are cleaned up, there is only one way we recommend to continue on a path to a stronger credit score and good financial health, and that is to practice “good credit hygiene”.

About ASKROSS Credit Renovation Services

I promise this commercial message will be brief.

Our team has helped thousands of Canadians optimize and clean up their credit histories since 2003.

Our relationship of mutual respect with the reporting agencies gives us the ability to fast track investigations with Equifax Canada (the primary agency used for mortgage credit checks), and we can often remove all reporting errors within just a few days of making the request. This is because they trust us not to make spurious claims or file incorrect information. And, we can also put together a similar package for you to send to Trans Union Canada.

And, our expertise is second to none. Ross Taylor is acknowledged as the foremost expert on personal credit within the Canadian Mortgage Industry and has been recognized as the industry’s Financial Literacy Leader since 2017. He is a frequent speaker and educator to mortgage brokers, lenders and trustees on credit matters.

If you believe you might have errors on your credit report and would like us to take a look, please contact us, or complete the form on this page.

The Takeaway

Reporting errors on your credit history are a fact of life. Even people who’ve never missed a payment or done anything wrong can have mistakes crop up for any number of reasons, including mistaken identity, mistakes by creditors, and even keying errors by agency employees. It happens.

Unfortunately, the opportunity for mistakes multiplies many times if you have ever needed to file a consumer proposal. And, that means if you want to get out of the penalty box and be able to enjoy the benefits of your hard work to clean up past missteps, it’s important to remain vigilant and check your reports for issues, and to keep on checking in case of errors get placed back into your file.

Whether you plan to buy a new home, apply for new credit cards, buy or lease a car, apply for an apartment lease, refinance to do renovations, or take out loans for any reason, our advice is the same. We strongly recommend all Canadians who have completed a consumer proposal in recent years check their credit history carefully and take steps to eliminate all reporting errors as soon as possible.

It could save you thousands of dollars.

We have a FAQ page where we list many of the questions which come up as we help our clients understand their personal credit histories and their credit score. Real Canadians with real issues. Perhaps you will find your question there.

​Ross Taylor
One of Toronto/GTA's Most Trusted and Knowledgable Mortgage Agents

Ross Taylor is recognized by his peers as one of Canada's pre-eminent difficult mortgage specialists. His ASKROSS blog and column ​ in Canadian Mortgage Trends are focused on the intersection between mortgage financing and personal credit.

With unique dual certification as a licensed credit counselor and mortgage agent, Ross's insights are valued by mortgage professionals and homebuyers alike.

If you have questions about anything financial or mortgage-related, please contact [email protected]. Ross answers everyone personally.

​For more information, visit About Ross Taylor.

Frequently asked questions on consumer proposals!

How long after a consumer proposal can I get a credit card or credit in general?

As soon as your proposal is approved in court (roughly two months after you filed) you may apply for a new credit card. There are not many creditors willing to lend to borrowers like you, so tread carefully.

When you are rebuilding your credit, the most impactful new credit is going to be a credit card – more than a loan by far.

In our experience, Capital One is a terrific company for credit rebuilding – even if they were included in your consumer proposal!

After they approve you, you will be expected to give them a security deposit, which rarely exceeds $300, regardless of the limit.

HomeTrust Company offers a credit card secured with a deposit from you. For every dollar you send to them, they will add it to your credit limit.

What’s really the difference between a consumer proposal and bankruptcy?

An insolvency trustee can explain the ins and outs of both to you, and in fact must do so by law when you approach them looking for debt relief.Both give you immediate relief from your creditors.

They are different ways of solving the same problem. One is not necessarily cheaper than the other, and in fact if you are filing a consumer proposal, the trustee must be satisfied you are offering at least as much $$ as the creditors would get if you filed a personal bankruptcy.

I have worked with thousands of Canadians who sought relief under the Bankruptcy Act, and I will tell you here, in general layman’s terms, what the main differences are which I have seen:

Once your consumer proposal is approved in court, the terms will not change. You will know exactly where you stand. As long as you do not miss three payments, you will be left alone.

But if you file a personal bankruptcy, you are never on certain ground. If your financial circumstances improve while bankrupt, it could mean you must pay more $$ than you first thought, in order to be discharged.

Filing a personal bankruptcy means you will be reporting to the trustee each month for at least nine months – filing an income and expense report. And if your net income exceeds certain threshold guidelines, the law requires you pay half the surplus to the trustee.

Best case scenario, a personal bankruptcy lasts nine months, but for many people it is twenty one months, depending on their reported net income.

Only three years after you complete your consumer proposal, it will fall off your credit report. Or six years after you first filed, whichever comes first.

A bankruptcy will stay on your personal credit report six years after you are discharged.

When you file a bankruptcy, the trustee will file your tax returns on your behalf and direct refunds etc. to your creditors. But when you file a consumer proposal, they are not involved at all.

Overall, a consumer proposal is less invasive than a personal bankruptcy and also gives you a chance to rebuild and restore your personal credit and good name much faster than a bankruptcy does.