Credit-damaged files
A bruised credit file is a timing problem, not a character problem.
Missed payments, a consumer proposal, a bankruptcy that is behind you — none of these end the conversation. They change which lender the file goes to, what it costs, and how long you stay there before moving back.
Most people arrive at this subject having already been told no, usually by a bank, usually without much explanation. The explanation matters, because the reason for a decline determines how long the problem lasts and what fixes it.
Credit damage is almost always temporary. Lenders are not judging you — they are pricing risk from a file, and the file changes as the payment history behind it changes. What follows is how those files actually get placed, and roughly how long each situation takes to move.
The tiers decide this, not the score alone
A credit score is one input. What lenders are really reading is the pattern behind it — what went wrong, when, whether it is still happening, and what your payment history looks like since. Two people with the same score routinely get different answers.
The three-tier structure on the alternative lending page is the frame here too: A lenders want clean, established credit; B lenders will price for a file that has been through something; private lenders care mainly about the property and the equity in it. Most credit-damaged files land at B, not private — and anyone who jumps straight to private without testing B first is not doing the work.
- Recent and ongoing
- Missed payments in the last few months, collections still open, balances at their limits. This is the hardest version, because nothing has stabilised yet. Usually the honest answer is to fix the pattern before applying at all.
- Recent but resolved
- A rough patch that has ended — collections paid, balances brought down, several months of clean payments behind you. B lenders will often work with this, and the clock to get back to an A lender has already started.
- Historic
- Something that happened years ago and has been clean since. Frequently placeable at an A lender, and often the applicant has assumed for years that it is not. Worth checking rather than assuming.
- Thin rather than damaged
- Not a bad file, just not much of one. Common for newcomers and for people who have avoided credit on principle. Different problem, different fix, and covered on the new to Canada page.
What a consumer proposal actually is
A consumer proposal is a formal, legally binding process under federal insolvency law. You work with a Licensed Insolvency Trustee, who develops an offer to your creditors — to pay a percentage of what is owed, or to extend the time to pay, or both — and files it with the Office of the Superintendent of Bankruptcy.
Your creditors then have 45 days to accept or reject it. Payments cannot run longer than five years. And unlike a bankruptcy, you keep your assets while it runs, provided you meet the terms — including your house.
That last point is the one that gets missed. A consumer proposal is not a forced sale. People go through one, keep their home and their mortgage, and come out the other side with the debt resolved.
What changes after a proposal or a bankruptcy
Both are reported to the credit bureaus and both stay on file for a period after they are resolved. Equifax and TransUnion do not use the same schedule as each other, so the honest answer to "when does it come off" is that you should ask the bureaus directly for your own file rather than rely on a general figure.
In practice the removal date is rarely the binding constraint anyway. What lenders weigh most heavily is what you have built since: a completed proposal or discharged bankruptcy, plus a stretch of clean, re-established credit that demonstrates the pattern has actually changed. Common practice at A lenders is to want the insolvency fully discharged and a meaningful period of re-established credit behind it — the specifics vary by lender, and this is exactly the kind of thing worth checking against current appetite rather than assuming from something you read.
Re-established credit means active accounts reporting on time, not simply the absence of new problems. A file with nothing on it at all can be harder to place than a file with two small accounts paid perfectly for two years.
What it costs while you are there
A B lender mortgage costs more than an A lender mortgage in three separate ways, and you should count all three rather than comparing rates alone. The rate itself is higher. There is usually a lender fee and a broker fee, calculated as a percentage of the loan. And the term is often shorter, which means you face renewal or refinancing costs again sooner.
Every fee has to be disclosed to you in writing, in dollars, before you commit to anything. That is a requirement on any licensed mortgage agent in Ontario, not a courtesy. If anyone is vague about fees, treat that as your signal to walk away.
What actually helps, in order
The things that move a credit file are unglamorous and they work. In rough order of impact:
- Stop the bleeding first
- One more missed payment resets the clock on everything below. If cash flow is the underlying problem, that is the thing to solve before anything else.
- Bring balances down
- Utilisation — how much of your available credit you are using — moves scores faster than almost anything else, and it moves them within a billing cycle or two rather than over years.
- Keep old accounts open
- Closing a long-held card shortens your credit history and reduces your available credit at the same time. It usually hurts.
- Rebuild deliberately
- A secured card or a small installment loan, paid perfectly, builds the record lenders want to see. Two years of that is worth more than any explanation letter.
- Check your own report
- Errors are more common than people expect, and a collection that was paid but never updated is worth disputing. You are entitled to your own file from both bureaus.
Straight talk
When applying now is the wrong move
If the problems are ongoing rather than behind you, an application now mostly generates a decline and a hard inquiry. Several months of clean payments first will change the answer materially, and there is no version of this where applying early speeds that up.
If a few months of paying down balances would move you from a B lender to an A lender, those months are usually worth far more than any rate negotiation. The gap between tiers is wider than the gap between lenders inside a tier.
If you are considering a private mortgage to consolidate consumer debt and nothing about your income or spending is changing, the mortgage will not fix the problem. It converts unsecured debt into debt secured against your home, at a cost, and the debt usually rebuilds — leaving you worse off than when you started.
And if you are partway through a consumer proposal, completing it is almost always the better plan than borrowing to settle it early on expensive terms. There are exceptions, but they need to be argued rather than assumed.
If any of that describes your situation, I will say so on the first call. I would rather tell you to wait six months than place you in something that makes your position worse.
Common questions
What people ask me about this.
Can I get a mortgage during a consumer proposal?
Sometimes, but the options narrow considerably and cost more while it is active. Lenders generally want to see a proposal completed, with the certificate, rather than a payment plan still running. If you are close to the end, waiting until it is formally completed usually produces a materially better result than applying midway through.
Will I lose my house in a consumer proposal?
No — that is one of the main differences from bankruptcy. Under a consumer proposal you keep your assets, including your home, as long as you meet the terms you agreed to. It is a formal arrangement to resolve the debt, not a forced sale of what you own.
How long after a bankruptcy or proposal before I can get a normal mortgage?
It depends far more on what you have rebuilt than on the calendar. Lenders want the insolvency fully discharged or completed, and then a stretch of re-established credit showing the pattern has genuinely changed — active accounts paid on time, not just an absence of new problems. Requirements differ by lender, so it is worth having your actual file looked at rather than working from a general rule.
Does checking my options hurt my credit further?
An initial conversation and a rough assessment need no credit check at all. When a formal application is made it involves one check, and multiple mortgage enquiries within a short window are treated as a single check by the Canadian bureaus — so shopping properly does not compound the impact.
My score is low but I have never missed a payment. Why?
Usually utilisation or thin history. Carrying balances close to your limits depresses a score even with a perfect payment record, and a file with very few accounts has little for the model to work with. Both are quicker to fix than genuine payment damage, and both are worth identifying before you apply anywhere.
Sources
Figures on this page verified August 2026. Rules change — if you are reading this long after that date, confirm before relying on it.
Related
Situations that often overlap.
Not sure where you fit?
That is genuinely the most common starting point. Twenty minutes on the phone will tell you more than another hour of reading, and there is no credit check to have that conversation.
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