*How long does bad credit stay on your credit report

How long does bad credit stay on your credit report Most Canadians who want to get access to a loan ... Read more

How long does bad credit stay on your credit report

Most Canadians who want to get access to a loan often ask themselves: “How long does bad credit stay on my credit report?” It is an essential question because your credit report plays a significant role in almost all financial decisions and contains crucial details about your credit history. Most lenders forward your bill payments (or lack thereof) to Canada’s credit bureaus,  which are reflected on your credit report every month.

Any change to your credit report will affect your credit score, which will in turn affect your likelihood of being approved for a major loan. An incident of bad credit, such as missed payments, defaulted loans or a declaration of bankruptcy are all potential red flags that may disqualify you from receiving a loan from major lenders, so it is natural to wonder how long these sorts of infractions stay on your credit report. 

Typically, negative credit information will stay on your credit report for six years, however this timespan can differ depending on the type of information. 

Common financial information and how long it stays on your credit report

There are many different items included in your credit report, and each one has a different shelf life. Below is a detailed  breakdown of what information you may find in your credit report and the length of time they are going to stay there.

Inquiries

Any requests to view your credit score will be listed as credit inquiries. Typically, the people who will most commonly request to see your credit report are lenders with whom you’ve applied for a loan to assess your eligibility. If you receive a large number of hard credit inquiries within a short span of time (As can happen when you apply for several different types of loans at once) this may be taken as a sign you are under financial strain and have a negative impact on your credit score.

Hard credit inquiries can stay on your report for up to three years, though the points lost on your credit score from too many hard inquiries can be recovered somewhat more quickly, typically within 12 months. An exception is made when there are five or fewer inquiries listed on your report, in this case these inquiries will not expire, regardless of how long they remain on your report.

Trade Items

Any account (Whether open or closed) that appears on your report is referred to as a trade item. Mortgages, installment loans, credit cards and lines of credit are all types of trade items. These items will stay on your report for up to six years from the date of last activity.

Late Payments

Late payments can stay in your credit report for up to 6 years, even if you have since resolved the past-due balance or associated late fees. So, if you made a late payment on a loan in September 2020, it will be listed on your credit report all the way until September 2026.

Collections

If you miss too many payments on an account, or leave an outstanding debt unpaid for too long, the original lender could eventually charge off the account and assign it to a debt collection agency. Any account that has been sent to collections will stay on your credit report for six years from the date of your last payment, regardless of whether the  balance was paid or not. 

Unpaid debt falling off your credit report is not an incentive to leave your outstanding debts unpaid: Doing so will have a massive, negative impact on your credit score, especially when it leads to our next item…

Judgments

If you leave your account unpaid for too long, a creditor or debt collector may take you to court to sue for nonpayment. Any formal decision made by a court against you is reflected on your credit report as a judgement and will remain on your report for 6 years from the date filed.

Consumer Debt Counseling

If you are in over your head with your debts, you may need to seek formal support and guidance through consumer debt counselling. Counseling is generally undertaken as a means to avoid bankruptcy and will be reflected on your credit report for up to 3 years from the date it was settled, or 6 years if it remains unsettled.

Consumer Proposals

A consumer proposal is administered by a Licensed Insolvency Trustee (LIT), and is a formal, legally binding process by which you create a “proposal” that identifies a percentage that you’re able to pay creditors, 

Much like debt counselling, a consumer proposal will remain in your report for up to three years from the date settled, or up to 6 years from the date filed if it remains unsettled.

Bankruptcy

If you have ever filed for bankruptcy, it will be displayed on your credit report. Bankruptcy is a process through which debt can be forgiven while lenders are still offered some measure of compensation based on the filer’s current assets.

Bankruptcies will remain on your credit report for six years from the date of discharge, or seven years from the date filed if you have not been discharged. 

Double bankruptcy is when you have filed for bankruptcy twice, and this type of bankruptcy remains on your report even longer. The oldest bankruptcy on your report will remain there for 14 years from the date settled (Or 14 years from the date filed if there is no date settled). Any subsequent bankruptcies will also remain on your report for 14 years from thye date settled or filed.

Garnishment

A garnishment is a legal process typically used for unpaid taxes or student loans or child support payments where deductions are taken directly from your salary or bank account as payment. A garnishment remains on your report for six years from the date it was filed, except in PEI, where it will remain on your report for 7 years from the date satisfied or 10 years from the date filed.

Foreclosure

A foreclosure occurs when one is unable to keep up with their mortgage payments and involves the mortgager taking possession of the mortgaged property from the borrower. This remains on your report for six years from the date filed.

Conclusion

While none of these items are good things to have on your credit report, the silver lining is that they all have finite shelf lives. Even if you have experienced major financial difficulties in the past there is always an opportunity to bounce back and eventually repair your credit score. 

If you are looking for a personal loan to consolidate your debt and help you on the road to financial recovery,  LendingArc is happy to help you find a loan at a rate that will work for you. Apply with us today and take the first steps to get your finances back in order

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