Life After Insolvency: How to Rebuild Credit After a Consumer Proposal
A consumer proposal isn't the end of your financial life. Discover how to use tools like KOHO to rebuild your credit score quickly and get back on track.
Filing a consumer proposal or declaring bankruptcy is a difficult decision, but often a necessary one to escape the crushing weight of debt. Once the paperwork is signed, you might feel a sense of relief—followed immediately by a new worry: “Will I ever get credit again?”
The truth is, a consumer proposal stays on your credit report for 3 years after you pay it off (or 6 years from the filing date, whichever is sooner). During this time, major banks often “blacklist” you. You might find yourself rejected for even basic credit cards.
But you don’t have to wait years to start fixing your reputation. You can—and should—start rebuilding immediately. Here is how KOHO can be your bridge back to financial health.
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The “Bridge” Strategy
Think of your credit journey as crossing a bridge. On one side is “Insolvency,” and on the other is “Prime Credit” (mortgages, low-interest loans). The bridge is the period where you prove to lenders that you are trustworthy again.
KOHO is the perfect tool to build that bridge because it does not discriminate based on past insolvency.
Why Banks Say No (And KOHO Says Yes)
Major banks have strict risk algorithms. If they see an R7 (Consumer Proposal) or R9 (Bankruptcy) rating, the computer automatically says “Decline.”
KOHO’s Credit Building feature is different. Because it is funded by you (via a subscription or a secured line you fund yourself), the risk to them is minimal. This allows them to approve users who are currently in a proposal or discharged from bankruptcy.
Step-by-Step Rebuilding Plan
Here is a practical strategy to use KOHO to rebuild your score post-insolvency:
1. The Foundation: Subscription Credit Building
Start with the basic Credit Building subscription.
- Cost: Small monthly fee.
- Benefit: Reports a positive tradeline to Equifax every month.
- Why: It requires no deposit and is the easiest way to get a “check mark” on your credit report every month.
2. The Graduation: Flexible Credit Building
Once you are comfortable, look at the Flexible Credit Building option (KOHO’s version of a secured line).
- Action: Set aside $30 to $500 of your own money as security.
- Benefit: This adds a second tradeline or a different type of credit to your file.
- Goal: It shows you can manage a “revolving” limit responsibly.
3. The Habit: Safe Spending
Use your KOHO prepaid card for daily spending (groceries, gas).
- Why: Since it is prepaid, you cannot go into debt. You can’t spend money you don’t have.
- Result: This rebuilds your financial habits alongside your credit score, ensuring you never end up in a proposal situation again.
Monitoring Your Recovery
One of the best features for recovering users is the in-app credit score monitoring. You can watch your score creep up from the 400s or 500s. Seeing that number rise is incredibly motivating and proves that your efforts are working.
A Second Chance
A consumer proposal is a legal mechanism to solve a math problem (too much debt). It is not a moral failing. You deserve a second chance to participate in the financial system.
Tools like KOHO are designed to give you that second chance. By starting small, automating your payments, and keeping your spending safe, you can walk across that bridge and emerge with a credit score that opens doors instead of closing them.
Learn more about credit recovery in our guides on How to Build Credit with a Prepaid Card and Guaranteed Approval Credit Cards.
📈 Start Your Credit Recovery
KOHO accepts everyone—even during or after insolvency. Use KOHO referral code C4MNILZARC to get up to $65 in referral bonus value.
