How long does bankruptcy stay on your credit report?
A first bankruptcy stays on your credit report for six to seven years after your discharge. Equifax removes it after six years. TransUnion removes it after six years in most provinces, and seven in Ontario, Quebec, Prince Edward Island, and Newfoundland and Labrador.
A record of your bankruptcy is added to your report on the day you file, and the 6-7 years begin once you’re discharged.
A first bankruptcy with no surplus income lasts for 9 months. That works out at roughly seven years from filing to the day it clears. If you are required to pay surplus income, the bankruptcy lasts 21 months, so it’s closer to 8 years.
A second bankruptcy reactivates the first bankruptcy on your credit report, and both appear for 14 years each.
| What appears on your report | How long it stays |
|---|---|
| First bankruptcy | 6 years after discharge, or 7 years on TransUnion in Ontario, Quebec, Newfoundland and Labrador and Prince Edward Island |
| Second bankruptcy | 14 years |
| Late or missed payment | 6 years from the date it was reported |
| Collection account | 6 years from the first missed payment |
| Hard credit check | 3 years on Equifax, 6 years on TransUnion |
Sources: Financial Consumer Agency of Canada – How long information stays on your credit report and Equifax Canada – How Long Does Information Stay on Your Credit Report?
Apply for a secured credit card
A secured credit card is the fastest way to start rebuilding your credit, because the lender reports your payments to the credit bureaus every month.
You make a cash deposit to the lender, and they set your credit limit to an amount equal to or greater than that deposit. Deposits range from a few hundred dollars to several thousand dollars. Purchases aren’t deducted from your deposit, and you make repayments just like a regular credit card.
Source: Financial Consumer Agency of Canada – Choosing a credit card
Use the card for small purchases you were making anyway, then clear the balance in full every month. The lender reports your payment history to Equifax and TransUnion, which can positively impact your credit score.
Once your credit score improves to a reasonable level, ask the card issuer to convert the account to a regular unsecured card. Your deposit is returned when you close the secured account, and the balance is paid off.
A card doesn’t have to be the only account you rebuild with. A car loan or a credit builder loan helps as well, because a mix of credit types looks better than a single account. Start with a secured card, as it’s the easiest to get approved for after a bankruptcy and the quickest way to build payment history.
More: Getting a Credit Card After a Bankruptcy in Canada
Your payment history counts for more than anything else
Payment history is the largest single factor in your credit score, making up around 35% of your total score. So, the best way to rebuild your credit score after bankruptcy is by making on-time payments. This demonstrates to lenders that you are a responsible borrower.
Source: Financial Consumer Agency of Canada – Improving your credit score
Creditors generally report a payment as late when it is unpaid 30 days past the due date. Make sure you pay within that time to avoid a hit to your score.
A missed payment stays on your credit report for six years from the date the account went into default. That applies to both Equifax and TransUnion credit reports. Paying the balance doesn’t remove it.
Sources: Equifax Canada – How Long Does Information Stay on Your Credit Report?; TransUnion Canada – Frequently asked credit questions
A reliable way to avoid missing payments is to set up automatic minimum payments on each account. You can then manually pay extra when funds are available.
Keep your credit utilization low
The Financial Consumer Agency of Canada recommends using less than 30% of your available credit. For instance, if you have a credit card with a $5,000 limit and your average balance is $1,000, your utilization would be 20%, which is below the recommended limit.
Source: Financial Consumer Agency of Canada – Improving your credit score
On a secured card, that leaves very little room. A $500 deposit provides you with a $500 limit, so 30% is $150.
Your issuer reports what’s on your statement, not what’s left after you pay. So $400 on a $500 card looks like a maxed-out card, even if you clear it every month. Keep the balance low, or add to your deposit to raise the limit.
Savings can help speed up rebuilding credit
Savings serve two important purposes after experiencing a bankruptcy. First, a larger down payment can help you secure a better interest rate and more favourable terms when you apply for financing again. Second, having a cash buffer allows you to avoid relying on credit cards for unexpected expenses, such as a car repair.
If possible, set up automatic transfers to your savings on payday. Even saving just $50 a week adds up to $2,600 by the end of the year. This amount can serve as a substantial down payment or provide a buffer against unexpected expenses.
Check your credit report for errors
Before you do anything else, pull your credit report from both bureaus and read it line by line. Equifax and TransUnion offer free credit reports updated monthly. Checking your credit report does not affect your credit score.
Sources: Financial Consumer Agency of Canada – Getting your credit report and credit score
Credit accounts eliminated due to your bankruptcy should appear as included in the bankruptcy on your Equifax report, and they disappear from there six years from the date of last activity. If an account still shows a balance owed, dispute it with the credit bureau.
Sources: Equifax Canada – Dispute Credit Report Information; TransUnion – Credit Report Disputes
Do this every few months, not once a year. An error that sits uncorrected will negatively impact your score for as long as it remains on your credit report.
Frequently asked questions
What is a good credit score?
A good credit score in Canada is 660 or higher. According to Equifax’s score range, a credit score of 660 to 724 is considered good.
Five main factors affect your credit score calculation:
- Your payment history: 35%
- Credit utilization (credit used vs. available credit): 30%
- Credit history length: 15%
- Public records: 10%
- Credit inquiries: 10%
How soon after bankruptcy can you get a credit card?
Usually right after discharge. A secured card is approved against your deposit rather than your credit history, so you are guaranteed to be accepted and receive all the benefits of a regular credit card. Making timely payments can help improve your credit score after bankruptcy.
Does a bankruptcy ever come off your credit report?
Yes. Equifax removes a first bankruptcy six years after your discharge date in every province. TransUnion does the same, except in Ontario, Quebec, Newfoundland and Labrador and Prince Edward Island, where it remains for seven years instead of six. A second bankruptcy appears on your credit report for 14 years.
Does checking your own credit report lower your score?
No. When you check your own credit report, it is recorded as a soft hit that only you can see.
How long does it take to rebuild credit after bankruptcy?
There is no specific timeframe for improving your credit score. The most important factor is your payment history. Making 12 months of payments on time towards a secured credit card can have a greater impact on your score than anything else you do. Lenders want to see a lengthy record of responsible payment behaviour.
Is a prepaid card the same as a secured credit card?
No. A prepaid card lets you spend money you have loaded onto it, and issuers do not report prepaid activity to the credit bureaus. A secured card is real credit with a real bill that must be paid every month, like a regular credit card. These payments are reported to the credit bureaus.
Book a free consultation
If you are considering bankruptcy or need help with debt, arrange a free consultation with a Licensed Insolvency Trustee. It costs nothing, and there is no obligation.
