It’s normal to be concerned about the credit score after filing bankruptcy. Rebuilding credit is important because a credit score can affect many things, such as interest on loans, insurance premiums and employment opportunities. Many potential clients ask if they have to wait seven years in order to mortgage a home or purchase a car. Fortunately, there’s no need to wait that long to begin rebuilding credit. In fact, it’s best to begin the rebuilding process as soon as the bankruptcy discharge is entered.
Take the following steps to improve your credit score after completing bankruptcy:
Review your Credit Reports: After receiving the bankruptcy discharge, obtain a copy of your credit reports from all of the major credit reporting agencies. You are entitled to one free report every twelve months from each agency. If you haven’t received your free reports, you can visit the Annualcreditreport.com web site to get them. Once you receive the reports, review them for errors. Debt that has been discharged in bankruptcy should show a zero balance. If there are errors on the credit report, you can send a dispute letter to the credit reporting agency to have the information corrected.
Obtain Credit: In order to rebuild credit, it is necessary to have credit. If you reaffirm a car loan during your bankruptcy case and you continue to make all payments before the due date, your credit score will gradually improve. Another option is to obtain a credit card. When searching for a credit card, it’s important to avoid applying for a lot of accounts at once because that can hurt your credit score. Some banks have tools that allow you to view cards that you are qualified for before applying. For example, the Capital One card finder tool allows you to search for cards for rebuilding your credit without affecting your credit score. You can also look for a secured credit card that requires a deposit in order to use the account since they’re easier to get. Remember to make sure that any debt you obtain is reported on your credit report since creditors are not required to report accounts and smaller companies might decide to forego the cost of doing so.
Make Debt Payments on Time: Once you obtain credit, use it responsibly and make sure that all of your payments are made before the due date. Try to pay the full balance every month and be patient. A huge jump in credit score will not happen overnight, but within a couple of years, your credit score should be significantly higher.