How would I rectifiy problem of foundation wall cracks with finished basement?

Insulating a cinder block (or CMU) foundation wall from the inside in cold climates is risky as it can cause cracking. A cinder block foundation wall is not as strong as poured concrete as it is only held together by the mortar between the blocks. So insulating it from the inside means you are changing the thermal conditions is has been accustomed to, and suddenly it will be subject to the seasonal freeze / thaw cycle. My guess is that is what happened.

How bad is the cracking? Is it anywhere close to being a structural problem? Before moving ahead with any more work it may be worth having a professional look at it to make sure it is safe. In order to stop the problem from happening again or getting worse, I think you would need to prevent the blocks from freezing again. I don’t imagine you want to remove all you have done to insulate the interior, so is there anyway you can work a bit on the exterior?

If so, I would propose the following – either get an excavator to dig down to below the frost line and install exterior rigid insulation, or, dig down a little bit, ad some insulation to the above grade portions and install a skirt insulation around the perimeter.

The skirt you can cover with dirt, and as for finishing the vertical wall portion, you could install either mineral wool or foam rigid insulation panels, read more here. On top of that you could apply a cement board that can be parged or left as is. Let me know if any of those options make sense.

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