A credit card can be useful for things like flights, hotels, or an emergency. So it makes sense that you want to hold on to your card when you file a consumer proposal.
The good news is that you can keep a credit card with a consumer proposal under certain conditions.
Can you keep a credit card with a consumer proposal?
You can keep an existing credit card while in a consumer proposal, providing the card has a nil balance long before you file.
To find out if you can keep your credit card during a consumer proposal, ask a Licensed Insolvency Trustee.
Occasionally, your card issuer may suspend your card if you enter into a consumer proposal. To avoid this, many people give up all their cards and start with a clean slate.
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Can I get a credit card while in a consumer proposal?
Like any debt settlement agreement, a consumer proposal affects your credit, so most lenders will turn you down at this early stage. If approved, you may be subject to higher interest rates and fees.
Until your financial situation improves, the best credit card for a consumer proposal is a secured credit card.
A secured credit card is like a regular card, except it requires you to put down a deposit secured against your credit limit. This allows the credit card issuer to take less risk when offering you a credit card.
This gives you access to the benefits of a regular card while rebuilding your credit rating during your consumer proposal.
Sensibly using a secured card will boost your credit rating because this information is reported to the credit bureaus. Just ensure that you use it regularly and make payments on time.
Then, after a while, you’ll be able to convert it to a regular unsecured card. When this happens, the card issuer will refund the deposit you put down for the secured card.
Applying for a secured credit card in a consumer proposal
Many lenders offer secured credit cards to people in a consumer proposal because it’s a safe way to provide credit while you rebuild trust with lenders.
Secured cards work similarly to debit cards. You have to pay a deposit which usually determines your credit limit. For example, if you deposit $500, you’ll be given a limit of $500.
As long as you use the card regularly and keep up the repayments, you’ll demonstrate good credit behaviour, show lenders that you’re responsible, and increase your credit score.
Can I get a credit card after a consumer proposal?
You can get a credit card after a consumer proposal, but you must rebuild your credit score before applying.
Once you make all your monthly payments, you will be discharged from your consumer proposal and all your unsecured debts included in the agreement are forgiven. Your proposal stays on your credit report for at least three years after completion.
When you are debt free, you have a better chance of getting credit. Aim to build credit by doing the following:
- Monitor your credit report regularly to ensure there are no mistakes.
- Pay your bills on time to ensure late payments don’t damage your credit.
- Use a secured credit card to build a positive credit history.
- Keep your credit utilization ratio low.
- Add new lines of credit, such as an RRSP loan or car loan.
- Avoid taking on too much debt.
By demonstrating that you can borrow money and manage repayments responsibly, you are more likely to pass a credit check.
How long after a consumer proposal can I get a credit card?
There isn’t any time limit on being approved for a credit card after a consumer proposal. It’s a matter of how quickly you can improve your credit.
It’s easier to get an unsecured credit card after you have completed your consumer proposal. But you must take steps to improve your credit score to give yourself the best chance of being accepted.
If you work at your credit score for a while, you’ll benefit from better interest rates and higher credit limits when applying.
Need debt relief but worried about your credit?
Don’t let the impact on credit stop you from filing a consumer proposal. In the long run, a proposal will help you by enabling you to pay off your debts, which is essential for future credit.
And remember, you probably already have bad credit if you’ve skipped or been late with payments to creditors.
If you file a consumer proposal, you avoid personal bankruptcy, which can be more damaging to your credit.
Credit is only beneficial when you can afford to repay it. If you already have credit with high balances, the chances are you will be rejected for further credit anyway.
You can eliminate your debt with a consumer proposal, which allows you to repair your credit faster.
As an added bonus, you will learn more about how to manage your finances through the credit counselling sessions included in the process.
You can keep a credit card with a consumer proposal
You can keep a credit card with a consumer proposal, but the card must have a nil balance before filing. Find out if you can keep it by speaking to a Licensed Insolvency Trustee.
If you want access to credit during your proposal, the best credit card for a consumer proposal is a secured credit card. It lets you rebuild your credit while giving you access to the benefits of a regular credit card while you complete your consumer proposal.
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