If you’ve been looking into ways to manage your debt, you may have come across debt consolidation. Simply put, it means combining multiple debts into a single, easy payment. If you’re dealing with several bills at once, such as credit cards, payday loans, or other unsecured debts, debt consolidation can help you stay organized, and if you qualify for a lower interest rate, it will save you money and can help you pay off your debt faster.
At Credit Canada, we’ve been helping Canadians get out of debt for over 50 years. We understand how overwhelming debt can feel, and we’re here to support you with non-judgmental advice and practical solutions that work for your life.
One common question we get is, “How long will this stay on my credit report?” Whether you’re using a Debt Consolidation Program (DCP, also often referred to as a Debt Management Plan), a debt consolidation loan, or another form of debt relief like a consumer proposal or bankruptcy, it’s important to understand what shows up on your report. In this article, we’ll explain how debt consolidation affects your credit score and what steps you can take to rebuild your credit over time.
What Appears on a Credit Report and Why It Matters
Your credit report is a record of your past financial behaviours and actions towards credit products, including credit cards, student loans, and bill payments. Canada’s two main credit bureaus, Equifax and TransUnion, collect this information and use it to calculate your credit score. Companies and lenders use your credit history to predict how financially reliable and responsible you are, and will check it when deciding whether to approve you for things like a loan, credit card, or even a rental application.
Your credit report includes both positive and negative details. Making payments on time and keeping your balances low can help your credit score, while missed payments, accounts sent to collections, or using debt relief options can lower it. This history won’t be on your report forever, but it can stick around for a while, depending on the account. Here’s how long different types of activity remains on your credit report:
- Missed or late payments stay on your report for six years.
- Accounts sent to collections stay for six years from the date of your last payment.
- Judgments are generally kept for six years, however, TransUnion may retain them for 7-10 years depending on your province.
- Hard credit checks stay for three years with Equifax, six years with TransUnion.
- Positive information, such as on-time payments, remain with Equifax as long as the account is open and up to 10 years after the account is closed. TransUnion will keep the information for up to 20 years no matter if the account is open or closed.
How Debt Consolidation Affects Your Credit Report
Debt consolidation itself doesn’t appear on your credit report. However, the specific method used, such as a consolidation loan, a DCP, or a consumer proposal, is what will appear on your report. How long it stays there depends on the type of consolidation and how you manage your payments.
Different debt consolidation options appear on your credit report in different ways. For example, a debt consolidation loan is reported like any other loan. If you make payments on time, it may be marked as “paid as agreed,” which can help your score over time. If you choose a Debt Consolidation Program (DCP) or file a consumer proposal, these show up as “3rd party consolidation” or similar with an R7 rating. This means you’ve made a formal arrangement to repay your debt.
You might also see “debt settled” if the creditor accepted less than the full amount owed. This means you’ve paid part of your debt and the remaining balance has been forgiven. While settling a debt may feel like a positive outcome, it’s not the same as paying in full. A “settled” account signals to future lenders that you didn’t repay the entire balance, which can have a negative impact on your credit score compared to “paid in full” or “paid as agreed.” This is different from bankruptcy, which shows up as an R9 – the most serious rating on a credit report.
Credit Report Timelines for Debt Relief Options in Canada
Each debt relief option has its own timeline for how long it stays on your credit report. If you enroll in a DCP through a credit counselling agency, it will usually stay on your report for six years from the time you start or 2-3 years after you finish, whichever takes longer. A consumer proposal disappears three years after it’s completed, while bankruptcy stays for 6-7 years, depending on whether you’re discharged. Debt consolidation loans are treated like regular loans and typically stay on your report for up to six years after it’s paid off and reported as closed, but positive information associated with the loan can remain for up to 20 years.
Here's a summary of how each debt consolidation option may appear on your credit report:
|
Debt Relief Option |
How It Appears on Credit Report |
Credit Rating |
Timeline for Removal |
|
Debt Consolidation Loan |
“Paid as agreed” |
R1 (if paid as agreed) R2-R9 (if payments are missed, depending on severity) |
6 years after final payment and account closure |
|
Debt Consolidation Program (DCP) |
“3rd party consolidation” or similar |
R7 |
Generally, credit bureaus remove all records related to a DCP 2 years after final payment. |
|
Consumer Proposal |
“3rd party consolidation” or similar |
R7 |
Equifax: 3 years after completion TransUnion: 3 years after completion or 6 years after signing, whichever is sooner |
|
Bankruptcy |
“Bankruptcy” |
R9 |
6-7 years after the discharge date (depending on the province), or 7 years after filing without a discharge date |
Short-Term vs. Long-Term Credit Score Impact
When you consolidate debt, your credit score may be affected, but the impact depends on the method. If you’re taking out a consolidation loan, you might notice a small dip in your credit score in the short term. This can happen due to a hard inquiry, closing old accounts, or opening a new one. These changes can temporarily lower your score, but the effect is usually minor and short-lived if you maintain good credit habits.
More formal debt relief solutions, like a DCP, consumer proposal, or bankruptcy, can have a longer-lasting impact. These options are noted differently on your credit report (marked as R7 and R9, respectively), signalling that you've entered into a formal repayment or debt discharge process. Because of this, the initial impact on your credit can be more significant, and the recovery timeline is often longer.
That said, your credit score can start to recover while you’re in a program, as long as you’re making regular, on-time payments and gradually reducing your debt. The most significant improvements, however, often happen after the program or proposal has been completed – usually two to three years.
While the initial impact can feel discouraging, it's important to remember that your credit can recover with time. Consistently paying bills on time, keeping balances low, limiting new credit applications, and monitoring your credit report all help support long-term recovery.
How Credit Canada Can Help
Understanding how long different debt solutions stay on your credit report can help you feel more in control of your financial future. Even if you’ve used a debt relief option like a DCP or consumer proposal, your credit isn’t ruined forever. Most negative marks have specific timeframes before they fall off your report, giving you a clear path to recovery.
Wondering how to rebuild your credit? Credit Canada can help you get started. Our certified Credit Counsellors can provide confidential, judgment-free advice, budgeting help, and personalize a plan that fits your life. If you’re struggling with your finances, our counsellors can also assess whether a DCP can help and identify the best debt relief solution to reduce and eliminate what you owe. Contact us today by calling 1(800)267-2272 or talk to our AI Agent, Mariposa.
