Having bad credit for some can become quite a financial curse. Bad financial decisions may result in bad credit reflecting red in our ledger, and we don’t want that. But how long does bad credit stay, especially for Canadians? Does it stay permanently and haunt you forever in life? Or does it gradually lose its financial imprint and disappear eventually? Today, we’ll know the answer to this overall financial burden. Let’s go.
Q: “How long does bad credit information stay on my credit report?”
Let’s dive right into it: debt that gets sent to collection agencies, a.k.a. bad credit information or delinquent credit accounts, generally remains on your credit record for the next six (6) years. But that exact length of time will also be dependent on the digressions of the respective credit bureaus. A credit bureau has the power to keep the information, positive or negative, in your credit report. This reflection can include information on payments you did or didn’t make on time. Credit bureaus keep this vital information in your credit report for a given period.
The exact time may vary depending on:
- financial information type
- location (province or territory)
- the credit bureau that made the report
Q: “What are the positive and negative information kept in my credit report?”
The Good Ones
Credit bureaus can keep positive information reflecting on your credit report indefinitely from the moment they created the report. Positive information like this is saved in your credit report and can help improve your credit score. Here are some of them:
- loan type
- loan length
- initial loan amount
- score on repayment
The Not-So-Good Ones
In general, it would take six (6) years for negative information to stay in your credit report. However, some of these may remain either for a shorter or longer period. Negative information in your credit report can hurt your credit score. Learn how to get a free credit score report in Canada here.
Negative information can include:
- missed debt payments
- accounts sent to collection agencies
- previous bankruptcies
Equifax Canada, a credit bureau, starts their count from when the debt gets first assigned to a collection agency. While TransUnion Canada, another credit bureau, does their countdown from the account’s delinquency date with the original lender.
Bad credit stays on your account for a couple of years because lenders use this necessary information in determining your risk level before eventually approving you for a loan. Unfortunately, there’s no means of deleting or eliminating this bad information from your report. The best thing to do is to make payments on time, apply for credit only when you know you can have it paid off eventually, and by making strategic credit inquiries.
There are numerous reasons for bad credit to appear on your report. The following are the most common bad credit information and the length of time it appears on average.
- Multiple bankruptcies
Six (6) years
- Credit cards
- Lines of credit
- Secured loans backed by assets
- Non-sufficient funds (NSF)
- Fraudulent closed chequing or savings accounts
- TransUnion Canada inquiries
- Legal judgments
- Debt management programs (DMP), if not repaid
Four (4) or fewer years
- Consumer proposals
- TransUnion Canada liens
- Equifax Canada inquiries
- Orderly Payment of Debts (OPD) with any credit bureau
Q: “What are judgments associated with having a bad credit?”
Judgments are debts you owe through the courts resulting from a lawsuit filed against you. For example, when somebody sues you and wins, this debt may reflect in your credit report. This information typically stays in your credit report for six (6) years. But TransUnion keeps this detailed information on file for seven (7) years when you’re from these provinces:
- New Brunswick
- Newfoundland and Labrador
In addition, TransUnion keeps this information on file for ten (10) long years in Prince Edward Island.
Q: “How long does good credit information stay on my credit report?”
There is good news to this article, don’t worry. Good credit remains on your report for much longer, unlike bad credit does. It will keep any on-time, paid-off credit account in good standing on your information for as long as twenty (20) years.
The majority believe it is terrible to have past credit history on your account for long periods. Contrary to that popular belief, that’s not the case. Instead, this is precisely the type of information you would want to reflect on your account since it shows lenders your vast financial experience and how responsible you are in loan management. On your credit report, you should strive for a long, positive, and ongoing credit history.
Q: “What kinds of credit information show up on my credit report?”
Whether good or bad, your credit report reflects essential information about how you spent and repaid in the past. The two credit bureaus in Canada, Equifax, and TransUnion can access this information, using it to determine your credit score or creditworthiness. The following are information shown in your report:
- Bank accounts (savings accounts, closed chequing)
- Registered items (a security interest granted over an item of property)
- Credit transactions (credit cards, lines of credit)
- Credit inquiries
- Secured loans (personal loans, mortgages, car leases)
- Legal judgments (lawsuits or court rulings)
- Debt collection (for accounts sent to collection agencies)
- Consumer proposals (a lender-loaner legal agreement)
Q: “What are some debt management plans?”
Debt management plans are informal proposals your credit counsellor makes to your creditors on your behalf. These proposals allow you to do proper debt consolidation and have one affordable monthly payment. In addition, the records from all your debt management plans get erased from your credit reports two (2) years from when you pay off your debts.
Q: “What are consumer proposals?”
Consumer proposals are legal agreements set up by licensed insolvency trustees. These trustees create proposals for your creditors where they agree, letting you pay off a percentage of your debt.
Equifax is known to remove consumer proposals from credit reports three (3) years after paying off all debts included in your proposal.
Meanwhile, TransUnion removes consumer proposals from credit reports either:
- After three (3) years of paying off all debts included in the proposal, or
- After six (6) years of you signing the proposal (whichever is sooner)
Q: “How long does bankruptcy remain in my credit report?”
Both credit bureaus, Equifax and TransUnion, usually remove a declaration of bankruptcy from credit reports after six (6) years from your discharge.
TransUnion removes bankruptcy from credit reports seven (7) years after you are discharged in these provinces:
- New Brunswick
- Newfoundland and Labrador
- Prince Edward Island
However, if you declare bankruptcy more than once, these bankruptcies will reflect in your credit report for 14 years.
The Financial Endgame
There is a level of seriousness when we talk about credit scores and reports, especially after knowing what implications our bad financial decisions can bear. So, since we are now more financially wiser after this read, let us learn to be financially responsible so as not to suffer the consequences and eventual burden of having a bad credit report. Instead, we should strive to achieve a favourable credit identity to enjoy the fruits of our hard-earned finances and properties as we move forward in life.
How Long Does Bad Credit Last In Canada?
How long can a debt collection agency in Canada collect your claims, and if it can technically collect at any time, is it long enough for you to take legal action against them to stop after six years? # I asked you for your thoughts on how long debt collectors can collect in Canada and how long debt collectors can collect your claims.
It is important to note that the maximum time a debt collection agency can collect a debt in Canada is two years, which does not necessarily mean that you no longer owe the debt. As mentioned earlier, the minimum period for a debt collection agency to collect your claims in Ontario is six years. The maximum time that debt collectors can collect your claims from you in Alberta, Saskatchewan, Manitoba, Newfoundland and Labrador is up to two years.
The length of time that negative information can remain on your credit report is governed by a federal law known as the Fair Credit Reporting Act (FCRA). Seven years is the maximum number of years in which many negative points can be listed in a credit report, as defined in the Fair Credit Reporting Act in Canada.
How long a bankruptcy filing is on your credit list depends on the type of bankruptcy you have filed. The size of the default and the duration it remains in the credit reports depend on the nature of the bankruptcies, but they are generally between 7 and 10 years.
If you leave an account unpaid for a long time, it could eventually lead to creditors and debt collectors taking you to court if you fail to make payments. How long a bankruptcy is on your credit report in Canada depends on which credit agency reports on you, but again, it depends on what the credit reporting agencies report. Equifax creditors have 30 days to respond, and how long consumers will get their credit reports back depends on the Canadian lender’s reports. If you notice an inaccuracy in your credit report, you can challenge it in court in the Canadian Civil Liberties Court.
For example, there is no limit on the time a debt collection agency can recover a claim in Canada, even if it is unpaid. If you ask for a list of debts that debt collectors can collect from you in Canada, you will know that most will cease after six years.
In the case of late payments, the impact of bankruptcy on your credit rating depends on the length of time since the filing date. You can get an idea of how long it will take to improve your credit score by getting a credit report. Once the public records area is cleaned up and thoroughly cleaned up, you can improve it as long as you do not have to clean it up yourself.
However, be aware that late payment will remain on your credit report for up to seven years. In the event of bankruptcy, late payments will also remain in your credit report until the time of notification.
On the other hand, if you go bankrupt again, your second bankruptcy can stay in your account for up to 10 years. Equifax has your first bankruptcy on the credit list and has kept it in your credit report for six years. Your credit history has a long memory, so things like missed payments will stay on the record for five years, while your bankruptcy will be there for ten years. Most bankruptcies can be on the have side for ten years or more, plus or minus a bit.
TransUnion will remove accounts with an adverse credit history after sending the debt to a debt collection agency, but accounts containing negative information will remain on your credit list. Late payment indicates the date on which the first payment was due, not the date.
If an account is overdue for a certain number of days, it may be sold to a collection agency that can place a new, derogatory note on your balance.
If an account is overdue for a certain number of days, it can be sold to a collection agency that can put a new, pejorative sign on your credit. Don’t go into too much detail, but many creditors in the United States can get a copy of your Canadian credit report if you instruct them. If you apply for credit in the United States, it is recommended that you consult your lender if you previously had an established credit history in Canada. Inform the debt collector that you are trying to buy a house and send your debt to the debt collector.
If a negative point in your credit report is older than seven years, creditors will exclude you from the credit claim due to conflicting information from the credit reporting agency.