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It’s no secret that debt affects your credit score. Your credit score is closely related to your credit report because the report includes all your missed or late payments.
And if you ever struggled with debt, you might be wondering: “how long does bad credit stay on your credit report in Canada?”. By the end of this article, you’ll find out how long you have to wait for the information to disappear from your credit report and how to remove negative items from your credit report yourself. Read on to find out more.
How long does information show on my credit report?
Bad credit information usually remains on your record for six years. However, credit bureaus report the information differently, so the exact length of time it takes for the information to disappear depends on the credit bureau and the type of information.
Why does information show up on your credit report for years?
Both good and bad credit information stays on your record for several years because it helps lenders determine your risk level when they consider approving you a loan.
Positive credit information, such as making your payments on time and in full, usually stays on your credit report for up to 10 years with Equifax and 20 years with TransUnion Canada.
Negative credit information, such as missed or late payments, accounts sent to collections, bad cheques, and so on, will show up on your credit for several years as well.
Equifax Canada starts counting the time from the date our debt was assigned to a collection agency and keeps the negative information on record for 7 years. TransUnion Canada starts counting from the date of your account’s first delinquency and keeps the negative information on record for 6 years.
However, different types of information stay on your credit report for different lengths of time. Here’s a breakdown of how long different items show up on your credit report.
Credit inquiries are requests lenders make to check your credit when you apply for something like a loan or a mortgage.
Hard credit inquiries will show up on your credit report for three years, after which they will disappear if your report has more than five inquiries. If your credit report shows fewer than five inquiries, they won’t disappear, regardless of the date.
Late payments usually stay on your credit report for up to six years after the date. Equifax keeps your late payments on the report even if you pay your past due balance. So, if you made a late payment in July 2015, it showed up on your Equifax credit report until July 2021.
Trade items are represented by all your open or closed accounts, as well as any loans, lines of credit, and credit card accounts you may have.
Trade items show up on your credit report for six years starting from the date of last activity. And if you didn’t have any activity on an account, the information will stay on your report for six years from the date you opened it.
If you miss your payments, the lender can eventually transfer your account to a debt collection agency. If this happens, the information will appear on your credit report for six years from the date of your last payment, whether you paid the balance in full or not.
If your report shows that one or more of your accounts have been sent to collections, it can have a significant negative impact on your credit score.
A lender or debt collector can eventually take you to court if you don’t make your payments for a long time. A judgment is a court’s formal decision resulting from a lawsuit. Judgments stay on your Equifax report for six years from the date of the ruling.
A garnishment is a legal process that enables a third party to subtract payments directly from your bank account. Garnishments are usually enforced when you owe tax money, miss child support payments, don’t pay your fines, or don’t make your student loan payments.
Garnishments show up on your credit report for six years from the date of the filing. In Prince Edward Island, the garnishment shows up on your credit report for seven years from the date satisfied or 10 years from the date filed.
Consumer debt counseling
Consumer debt counseling can offer guidance and support when you’re struggling with debt. If you receive consumer credit counseling, the information will show up on your credit report for six years.
A consumer proposal is a formal, legal agreement negotiated between you and your creditors. This agreement offers immediate relief from collection efforts in exchange for agreeing to pay for a part of your unsecured debt.
Only Licensed Insolvency Trustees are legally allowed to administer consumer proposals in Canada. Your trustee will work with you to create a proposal that satisfies your creditors while being appropriate for your financial situation.
Consumer proposals remain on your credit report for three years from the date they were satisfied. If unsatisfied, they will show up on your credit report for six years from the date they were filed.
Bankruptcy is a safe, legal process that can help those who struggle with debt regain their financial freedom.
Regulated by the Canadian Bankruptcy and Insolvency Act, the bankruptcy process offers debtors protection from creditors and collection agencies, stops any wage garnishments, and gives debtors counseling so they can avoid repeating their past mistakes.
Most bankruptcies will show up on your credit report for six years from the date of your discharge. If you are not discharged, most bankruptcies will remain on your credit report for seven years from the date they were filed.
However, things change if you file for bankruptcy more than once. Filing for bankruptcy more than once is called a double bankruptcy, and it will determine the credit bureaus to keep the information about your oldest bankruptcy on your credit report for 14 years from the date it was settled. If it wasn’t settled, the information will show up on your credit report for 14 years from the date the bankruptcy was filed.
The recent bankruptcy will also show up on your credit report for 14 years from the date it was settled or filed.
If you don’t make your mortgage payments, the mortgagor (e.g. bank) can take possession of the mortgaged property in a legal process that’s called a foreclosure.
Foreclosures remain on your credit report for six years from the date they are filed.
Three ways to remove negative items from your credit report yourself
You can help remove negative items from your credit report yourself:
- Ask your creditors to remove them – You may be able to convince your creditors to remove the negative items in certain circumstances. For example, if you’ve never missed a mortgage payment, but you miss one by accident, you may be able to convince your creditor to remove the negative item from your credit report.
- File a dispute with your credit agency – You can ask your credit bureau for a free copy of your yearly credit report to check for errors. If you notice any inaccuracies in your report, you can file a complaint with the credit bureau and the creditors have 30 days to respond to it. Keep in mind that you should provide proof to back your claims. And if you’re right, the negative information can be removed from your credit report.
- File a complaint with The Financial Consumer Agency – If you notice that your credit report shows inaccurate information, you can file a complaint with The Financial Consumer Agency of Canada. The Agency can help you address inaccuracies made by financial institutions or credit card companies.
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