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How to Repair Your Credit Score after You File for Bankruptcy

Your credit score is likely to suffer dramatically from a bankruptcy. The better your score originally, the more it drops. If you had terrible credit before, a filing may not cause such a big drop. Either way, you’ll likely have a very low credit score for a very long time unless you take positive action to improve it.

Here’s how those factors are influenced by a bankruptcy:

  • Timeliness of payments: This category may be heavily affected, especially if yours is among the nearly half of all bankruptcies that happen with no prior delinquencies. After you get new credit, be sure to make all your payments on time, every time.

  • Amount and proportion of credit used: In a bankruptcy, you or your lenders close most of your accounts. Your available credit drops to $0 in most cases. As you reestablish credit, expect low limits at first. Try not to carry balances over 50 percent of your limit for best results.

  • Length of time you’ve been using credit: Here again, your score is damaged, because the history on your open accounts stops at your filing. Negative accounts drop off your record in seven years, although the bankruptcy record may remain for up to ten years. Positive accounts are reported for at least ten years and sometimes longer.

  • Variety of accounts: Chances are you’re left with only secured debt such as mortgages, student loans, or car loans. All your revolving and retail accounts may be gone, which means that you don’t have the variety of accounts that helps boost your credit score. Consider a secured credit card or a passbook loan to restart your revolving or installment credit history.

  • Number and types of accounts you’ve opened recently: After the bankruptcy, you may have more activity here than usual as you attempt to reestablish your credit. And your score will fall. (The more inquiries you have for new accounts or changes, the lower your score.) To minimize damage, don’t apply for more accounts than you need.

A helpful tactic is to take steps to improve your credit in each of these five areas. And don’t forget that creditors don’t necessarily report to all three credit bureaus. Now more than ever, you want to make sure that your good creditor experiences get onto all your credit reports.

Ask a potential creditor whether it reports all your information to all three bureaus. If it doesn’t, try to get credit from another creditor that does.

Follow the tips below to increase your credit score as much as you can in the aftermath of your bankruptcy:

  • Keep one or two of your older and lower-balance cards or lines of credit open by reaffirming them.

  • Apply for a secured credit card. This type of account uses a deposit to secure or guarantee that you will make the payments. Most report to the credit bureaus as any other credit card would, but be sure to ask the issuer whether the card you choose is reported.

  • Open a passbook savings account, and then borrow against it to demonstrate that you can make those fixed payments on time every month. Again, make sure that the lender reports the loan to the credit bureaus.

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