You might be wondering what happens to your credit card when you file for a consumer proposal. Most of us rely on our credit cards daily. They can be a convenient way to make purchases in person and online from the comfort of our homes. These days, many stores don’t even accept cash!  

Having a credit card is convenient and makes our lives easier. If you rely on your credit card, it is vital to have a solid credit history. 

Your ability to use credit card access may be  affected when you file for a consumer proposal. Once you file for a consumer proposal, it can stay on your credit report for three to six years. 

Getting access to additional credit during this time can be challenging. It is crucial to explore all your debt relief options so you can make the best decision for yourself. Speak with an Expert at EmpireOne Credit for answers to any of your questions.

What happens to my credit cards when I file a consumer proposal? 

When you file for a consumer proposal, you will have to hand in any credit cards that are part of the proposal. The creditors will freeze or close  the credit card for which you previously qualified. 

You might have a credit card with a zero balance or a credit balance not included in the proposal. These creditors may be informed and can decide whether they will keep allowing you to use the credit or they may rescind it. 

If you do keep the card, it is important to use it responsibly. Apart from the convenience of having a credit card, this can also help you rebuild your credit rating quickly. 

Can I get a new credit card during a consumer proposal? 

For most people, it is not easy to qualify for credit during a consumer proposal. The consumer proposal is recorded on your credit report and likely impacts your credit score. 

Remember that inquiries on your credit score when you apply for credit impact your credit score. If you apply for a credit card and get rejected, this will further impact your credit score.  

If you have ongoing debt obligations, like your existing mortgage, continue to make payments on time and in full. Consistent on-time payments will positively impact your credit score, which can help you qualify for a credit card soon after you complete the consumer proposal. 

One option to build credit is to apply for a secured credit card while going through a consumer proposal. A secured credit card will help you build a positive credit history when used responsibly. 

Build credit with a secured credit card

Many financial institutions offer secured credit cards with a small credit limit. You can use this secured credit card where paying for cash is not possible, such as in online transactions. 

How does a secured credit card work?  

A secured credit card is a unique type of credit card backed by a cash deposit. In essence, a secured credit card works like a debit card, where you need to have funds available in cash to use the limit. 

However, unlike a debit card, the bank sends your payment history to the credit bureau. This information is essential when building credit when using your secured credit card. Lenders can see that you are meeting your obligations, and this can help build trust with them for the future. 

Additional Tips to build your credit in a consumer proposal 

Credit counselling sessions

During your consumer proposal, you will attend credit counselling sessions conducted by a professional such as a debt experts.  These sessions can allow you to learn how to apply for credit and use it responsibly. 

Review your credit report for any errors

After a consumer proposal, many people find errors in their credit reports. For example, creditors might continue to report balances as past due when the debt was part of a proposal. Continue to check your credit report and correct any errors right away to help you rebuild your credit.

Use your credit responsibly.

When you start to use available credit responsibly, such as a secured credit card or making on-time payments on your existing debt, it can help positively impact your credit score. Lenders will start to see that they can trust you with credit. 

Pay bills on time. 

It is vital to make on-time payments if you want to rebuild your credit score. If you have continuing debt such as student loans or a mortgage, while in a consumer proposal, making on-time payments will help you improve your credit score. 

Credit Cards and Consumer Proposal 

If you consider filing for a consumer proposal, it is crucial to make this decision and know all the facts. Filing for a proposal will impact your ability to access credit throughout the process. 

While credit cards offer convenience, they can also negatively impact your credit score when not used responsibly. Filing for a consumer proposal can give you the fresh financial start you need to start building your credit again. 

Our team of credit counsellors can provide expert advice customized for your financial situation. Call us for a free consultation.