Times are tough and more Canadians are declaring bankruptcy than ever before. In fact, more than one in eight Canadians will either negotiate a debt settlement with their creditors or declare bankruptcy.
The majority of people who declare bankruptcy will apply for a mortgage at some point, and having less-than-perfect credit doesn’t automatically mean they won’t be approved.
What Lenders are Looking For
Basically, a lender wants to know that you’ll be able to make your mortgage payments. The federal government has instituted measures with the mortgage stress test that pretty much ensures they can guarantee that before approving your application—good credit or not.
Getting Your Credit Back on Track
It’s not impossible to enliven your financial picture after you’ve suffered a bankruptcy. Doing so will help you to secure that mortgage when you’re looking to buy a home. There are lenders in business who may look more favourably on your circumstances than conventional banks. They are willing to take on added risk at a higher price to you—usually higher interest rates.
No matter what led to the bankruptcy, you’ll have to tell prospective lenders a few things about the circumstances like how long ago the bankruptcy happened and when it was discharged. Lenders will also want to know how long you’ve been working to get your credit rating back in good standing.
An independent mortgage broker may be able to help you find a mortgage when big banks won’t.
Meanwhile, here are some ways you could work toward re-establishing credit after a bankruptcy or a consumer proposal:
- Pay your bills on time
- Obtain a secured credit card
- Make a monthly budget and stick to it
- Get a contract for a cell phone
- Stop writing cheques and pay for items with cash
- If you do get a credit card, pay off the balance each month
- Consider getting a loan for an RRSP
- Avoid going into debt again
Rebuilding your credit will ensure you have a bright financial future. You will have to work to earn the trust of creditors again and doing everything you can to prove that will help. Lenders who see that you’ve taken steps in the right direction might qualify you even when the bankruptcy still shows up on your credit record. Declaring bankruptcy is usually unavoidable in many circumstances, but it doesn’t have to mean that you will never own a home.
