People often wonder if it’s possible to improve credit after bankruptcy. Yes, it is possible, and maybe surprisingly, it doesn’t take very much time or effort.
When the bankruptcy case is filed, many people are in a difficult financial situation and their credit score is already low. Filing bankruptcy would not have a big impact on one’s credit score in such a case.
Once the bankruptcy case is completed and the debts are cleared by the court, you already have a powerful start to financial recovery and rebuilding credit. The debts that used to weigh you down and damage your score, are now resolved.
While this is an excellent start, there are steps you can take after bankruptcy to build up credit score faster:
• Open a new credit card to build new credit history, use it periodically and pay it off each month.
If you have trouble opening a traditional credit card account at first, ask the bank to open a secured credit card – where you put down a deposit and then the credit limit is equal to the amount of deposit. In essence, it works like a prepaid debit card, but it is reported as a credit card account on your credit report. If you open a traditional credit card account, the interest rate will likely be high at first but don’t let that discourage you – plan on paying off the balance each month to avoid interest. The interest rate and credit terms should improve as you continue to build new credit history and improve your credit.
• Check your credit reports periodically for accuracy.
You can get free reports once a year from each of the three credit reporting agencies – TransUnion, Equifax and Experian – from www.annualcreditreport.com. They don’t show credit scores in these free reports, but they do give detailed credit report information about your accounts. If you wish to buy credit scores, they offer them for a low price, currently $7.99.
The accounts for which the balances were cleared through bankruptcy, would still be noted on the credit report until they age out. Normally, credit reporting bureaus list accounts for 7 years from the date of the last activity. Experian and TransUnion detailed credit reports, such as the ones available from www.annualcreditreport.com, would show you the “estimated month and year that this item will be removed” for each credit entry.
Assuming these accounts were properly listed on the bankruptcy petition, they would be reported with $0 balances after the bankruptcy case is closed, and sometimes with a note that these accounts were “included in bankruptcy” or “discharged in bankruptcy.”
If you see a mistake, dispute it as soon as possible (either with the lender and/or with the credit reporting agency that’s showing the mistake).
• Just wait for time to pass.
The more time goes by after the bankruptcy case is closed and after you’ve started building new credit history, the higher your credit score will be. For many people, their credit score would already be higher within a year after bankruptcy than before the bankruptcy case was filed, assuming they have new good credit history.
• Don’t pay anyone for credit repair.
No one can do anything else for credit repair, besides what’s listed above. The credit repair companies usually do pretty much nothing (at best) or try to get people to change their Social Security numbers or get a new identity or something else equally drastic or illegal – all while charging hefty fees. Federal Trade Commission has been issuing warnings regarding credit repair scams.
Bankruptcy is not something that destroys you financially, despite of what banks would like you to believe.
On the contrary, it’s often a powerful way to resolve the debts and improve your financial situation.
If you are looking for additional information about rebuilding credit, a good source of free additional information is www.publications.usa.gov This is a federal government site which has financial information for consumers and recommendations from the Federal Trade Commission. This free information is available in electronic and print form.
Also, if you would like to find out more about bankruptcy or improving your credit after bankruptcy, contact a bankruptcy attorney who would be able to analyze your situation in detail and provide feedback tailored specifically to your case.
Should you decide to file bankruptcy, it’s very important to make sure that it’s done correctly and that all of your creditors are properly listed and properly notified of bankruptcy. Otherwise, they may be able to keep pursuing you and continue collection activities, and report balances as still outstanding and unpaid rather than resolved. For best results, I recommend that you contact a local experienced bankruptcy attorney.
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