How does debt relief affect your credit score?
In short
Every route that involves a third party is reported to the credit bureaus in some form, and the effect differs by route and by your existing file. Missed payments already on your file are themselves reported. Any service promising your credit will be untouched is making a claim it cannot support.
Updated
What is reported, route by route?
A consumer proposal and a bankruptcy are both public filings and are reported as such. A debt management plan is usually flagged on the accounts it covers. A settled account is generally reported as settled for less than the full amount. A consolidation loan appears as a new account plus a hard inquiry.
How long does it last?
Reporting periods differ by route, by bureau and by province, and they change. Rather than trusting a number you read online, ask the provider or trustee to tell you exactly what will be reported on your own file and for how long.
What already happened before you act?
People often delay because they fear the credit consequence of acting. Missed payments, high utilisation and accounts in collections are already on the file by that point. Doing nothing has a credit consequence too; it just arrives more slowly.
Frequently asked questions
- Can I check my credit report for free?
- Yes. Both national credit bureaus provide Canadians with free access to their own credit report. Check it before you act, so you know what is already there.
- Will paying an old collection remove it?
- Paying it generally updates the entry rather than deleting it, and in some provinces acknowledging a debt can restart the limitation clock. Take advice before paying an old account for that reason alone.
- Which route is gentlest on credit?
- That depends entirely on your existing file, and it is the wrong question to lead with. The right question is which route you can actually complete; an abandoned plan is worse for your file than the right one finished.