After your Consumer Proposal has finished, you’ll be raring to get your life back to normal. The rest of your debt has been written off and for the first time in years the burden of debt weighing you down has been lifted.
There’s just one little problem – your credit rating. Once you had a credit card with a limit of thousands, now anything that requires a credit check is an obstacle. Because of the Consumer Proposal you’re hard pressed to find anyone willing to give you credit and it’s incredibly frustrating. Even getting a new mobile phone contract could be a problem.
Take heart. The last four years has been the hardest part. Rebuilding your credit – while irritating – will be relatively straight-forward and here are a few tips to get you started.
Clean Up Your Credit File
It’s important to check the file the credit agencies hold on you to see if there are any incorrect entries or associations. For example, you may mistakenly be associated with someone you house-shared with in the past, or if you’re divorced you may still be linked to an ex-partner’s finances.
Send A Copy Of Your Discharge Certificate To The Credit Agencies
Once everything is completed with your Consumer Proposal and all the loose ends are tied up, your Insolvency Practitioner will issue you with a Discharge Certificate. Make a few photocopies and send them in to the credit reference agencies so your Consumer Proposal discharge can be logged on your credit file.
Stand Up And Be Counted – On The Electoral Register
If you have not already done so, ring up your local council and arrange to get onto the electoral register as soon as possible. Being on the register will help give lenders and credit agencies a little more confidence to lend to you after your Consumer Proposal as it is official confirmation of your address.
Pay On Time
If you must make regular payments on anything – for example a mortgage or mobile phone contract – make sure everyone is on time. One of the good things about a Consumer Proposal is after spending four years making regular payments you end up very good at it! Stick with this habit when the Consumer Proposal is finished.
Never Miss A Payment
Accidents do happen – sometimes a payment will end up late through no fault of your own, but the credit agencies will still hold you accountable and log that mistake on your file – not a good thing to have after your Consumer Proposal. It pays to be pessimistic and anticipate problems in advance.
Set up direct debits for credit or store card payments to go out well before the payment date. Be aware of cards that take payments every 28 or 29 days, which means the payment dates could change every month.
If you must move a direct debit to another current account, make sure you have enough money to cover it just in case your instructions are not carried out and it is still taken from your old account.
Get A Credit Card
Please be careful if you carry out the following couple of tips; credit cards may have led you down the path to a Consumer Proposal so you will need strong will power to ensure they don’t lead you there again.
Despite the damage credit cards do, strangely they can be used for good and help you build your credit rating back up after your Consumer Proposal. Every time you make a payment on a credit card on time, you add a good credit event to your file, so you want to build up a bank of these good credit events.
But it’s a fine line to tread – use the card ONLY to pay for one weekly shop or a tank of petrol every month. When the bill comes in, pay it off in full.
Unfortunately, only those cards with high rates will be open to you, some of which can be up to 25% APR and upwards, but this doesn’t matter. You will not be carrying a balance like you used to so bite the bullet and get one specifically designed for people with poor credit histories. Some companies may reduce the interest rate over time as you prove yourself credit worthy.
The Last Resort… Pre-Paid Credit Cards
If your credit history is very poor, you may even find getting high APR credit cards is very difficult after your Consumer Proposal. If that’s that case, there’s a newcomer on the credit card scene that could help.
Pre-paid credit cards allow you to put money onto your card in advance and, if you pay the card’s monthly fee on time, a record of your good payment will be sent to the credit agencies to go onto your file.
The effect a Consumer Proposal will have on your credit rating may seem scary at first, but the benefits more than outweigh the disadvantages. The sooner you start building up your credit rating the sooner you will be able to put the bad times behind you and move on to enjoy all the benefits of a debt-free future.
CONSUMER PROPOSAL EXAMPLE
Example Unsecured Debts
|2||Credit card 1||$6,812|
Your Monthly Repayments Would Be
a Consumer proposal $748
(total contractual repayments)
a Consumer proposal $295
(total contractual repayments)
* Subject to creditor acceptance
* Payment subject to individual circumstances
* Credit rating may be affected
* Fees apply, subject to individual's circumstances.