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Credit Repair After Bankruptcy: A Step-by-Step Guide

Nobody plans to go bankrupt, yet hundreds of thousands of people file for bankruptcy yearly. It’s a very challenging phase of life, whether you are young or mature. Bankruptcy feels like a setback, but it's important to remember you can always have a fresh start. With dedication and smart financial choices, you can rebuild your credit and secure a brighter financial future. D. & A. MacLeod Company Ltd is here to guide you as you take a new leap in building a solid credit score and undertaking credit repair.

a couple sitting on the couch reviewing their financial statements


The Basics: What's a Credit Score?

Credit scores in Canada generally range from 300 to 900. This number reflects your creditworthiness, essentially how likely you are to repay the money you borrow in terms of a loan, credit card or a monthly contract repayment like your mobile phone. People with credit scores above 660 are considered low-risk borrowers and typically receive the best rates and terms.


Filing for bankruptcy in Canada offers a fresh start by discharging most debts, such as credit cards and loans. A licensed trustee oversees the process of selling non-essential assets to repay creditors some money. The process typically lasts 9 to 21 months. While bankruptcy stops creditor harassment and eliminates most debts, it also hurts your credit score for several years.



6 Steps to Rebuild Your Credit After Bankruptcy

Now that we understand the importance of a credit score let's dive into practical steps you can take to rebuild yours:


1. Plan a Monthly Budget: It's essential to create and stick to a realistic budget to manage your finances effectively. Keep track of your income and expenses, allocate funds for essential needs, and avoid unnecessary spending. A budget helps you stay on top of your bills and prevents falling back into debt.


2. Pay Bills on Time: Your payment history is the most crucial factor affecting your credit score. To avoid missing payments due to forgetfulness, consider setting up automatic payments for rent, utilities, and phone bills.


3. Get a Cell Phone on Contract: Credit bureaus receive information on your payment history from many providers.  Having a cell phone contract and making monthly payments consistently can positively affect your credit score.


4. Get a Secured Credit Card: Secured credit cards require an upfront deposit that serves as your credit limit. If used responsibly and payments are made on time, you may receive an offer for an unsecured credit card with a traditional credit limit.


5.  Use Money You Can Pay Back: Use secured credit cards or any new credit you acquire solely for essential purchases you can afford to repay in full monthly. Avoid revolving debt on your credit cards to maintain your credit score, as high credit utilization can be detrimental.


6. Don’t Make the Same Mistake Again: Don't overdo it on credit cards or loans after bankruptcy. Focus on developing a savings habit and prioritize paying for purchases with cash whenever possible.


At D. & A. MacLeod Company Ltd, we’ve been helping people in Ottawa and Eastern Ontario navigate financial challenges for over 70 years. Our Licensed Insolvency Trustees (LITs) team understands the complexities of credit repair after bankruptcy. Don't hesitate to contact us today for a free consultation. We can offer personalized advice, help you develop a sustainable financial plan, and explore debt management solutions if needed.



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