“Thank you again for all your help Lee – it is truly appre­ci­ated. Your cus­tomer ser­vice has, as always, been awe­some. Jeff seems like a great addi­tion and I find you both help­ful and accommodating.”

In the last cou­ple weeks I’ve had a few clients referred to me that were pre­vi­ously bank­rupt, try­ing to obtain a new mort­gage, or some­thing bet­ter than the cur­rent pri­vate mort­gage that they are in.  Unbe­knownst to them, most major lenders have no inter­est get­ting in bed with some­one that has had these severe finan­cial dif­fi­cul­ties.  And they won’t even review most appli­ca­tions if the appli­cant hasn’t taken the steps nec­es­sary to repair their credit.  That being the case, that’s why I’m writ­ing this today, to help peo­ple get back on their feet with their credit so they can enjoy the same rates as every­one else.  It’s bad enough that any­one fil­ing for bank­ruptcy must wait 6 years after dis­charge before this infor­ma­tion dis­ap­pears from your credit report.  This will get extended another 2 years at min­i­mum as most major lenders want to see that you have re-established your credit before decid­ing to lend you more money.  It sounds like a bit of a catch-22, doesn’t it?  Well, it is, sort of.

The first thing any­one must do once they receive their dis­charge papers is to estab­lish two new trade lines.  This means apply­ing for NEW credit.  In some instances, credit cards that weren’t in involved in the bank­ruptcy are kept open, but these don’t qual­ify in the eyes of a lender.  They want to see new credit on your credit report.  As most lenders won’t grant you unse­cured credit at this point, it will be nec­es­sary to speak to one of the lenders that do pro­vide secured credit cards (i.e. your main bank, Home Trust, or Cap­i­tal One).  These types of lenders will require that if you want a $500 limit, that you will pro­vide at least $500 in col­lat­eral for them.  With that, they can pro­vide a new credit card to you, and your credit report will begin to repair itself. 

The trick to this is that you need two lines of credit.  Don’t even bother apply­ing for an unse­cured card at this point — you can’t afford the point­less credit inquiry.  Try two lenders, and you may even want to con­sider get­ting an RSP loan to help you with your credit repair.  These are com­monly offered on the spot, regard­less of credit, and the pay­mentsand inter­est are quite low.  Not to men­tion the addded ben­e­fit that it goes towards your RSP and cre­at­ing added sav­ings for you.  This also goes a long way in the eyes of a lender, to see that you have addi­tional sav­ings when apply­ing for credit after being bank­rupt or fil­ing a con­sumer proposal. 

Another option when try­ing to estab­lish credit, there is a com­pany in Toronto, Pru­dent Finan­cial Ser­vices, that offers secured loans for the pur­pose of re-establishing credit.  It can be secured against an asset like your car, or I believe they can do other forms of col­lat­eral loans.

Lastly, and going back to the ear­lier point about RSP loans, lenders want to see that you’ve been respon­si­ble with the new finan­cial free­dom that comes with being dis­charged from bank­ruptcy.  And that means with the improved cash flow, you should set up a sys­tem­atic sav­ings plan.  Reg­u­lar con­tri­bu­tions to a sav­ings account and/or RSP.  I would rec­om­mend the RSP as it is a bit more work to remove money, and this could be enough of a deter­rent to keep it there.  There are also the added tax ben­e­fits that come with this.

As you can see, there’s a bit more to it than peo­ple prob­a­bly real­ize when it comes to repair­ing your credit and prepar­ing to buy a home after being dis­charged from bank­ruptcy.  If you would like to dis­cuss this in more detail, or copies of some free reports relat­ing to credit repair, please con­tact me at lee@welbanks.com or call my office at 416 698 9990.

“I had a really chal­leng­ing time secur­ing a mort­gage with another bro­ker– and was in a huge time crunch. Not only did Lee assist me in an extremely timely man­ner, he was always avail­able through the process to resolve my con­cerns. His assis­tant, Jeff,  was also fan­tas­tic and brought a smile to my face on every occa­sion we spoke — which was rare dur­ing such a stress­ful time.  I would rec­om­mend Lee to any­one look­ing for a smooth AND cost effec­tive mortgage.”

“On March 22nd, we lost our Great Dane, Atti­cus after emer­gency surgery for bloat.  We thought Atti was in the clear, but he took a very quick down­turn and there was noth­ing any­one could do.

Lee, I owe you a huge thanks.  Atti­cus’ surgery and care was very expen­sive. Hav­ing that line of credit meant we could do every­thing pos­si­ble, with­out hav­ing to worry about costs.  It will take some time to recover, both emo­tion­ally and finan­cially, but we don’t have to carry the guilt of “what if we could have afforded more?  Would that have saved him?”.    In your own way, you helped more than any­one else.   Our sin­cere thanks.”