Action #: Open A Secured Credit Card Account
If you have no credit history or need to start developing a positive payment history, open a secured credit card account.
This requires you to pay a deposit and this is the limit of your credit. The secured credit card provider reports your payment habits to credit bureaus, which helps you start gaining points.
Tip: when opening a secure credit card, make sure you ask whether they report repayment behavior to TransUnion, Experian, or Equifax. Not all secured credit cards will do this, which defeats the purpose. Pre-paid cards dont usually report at all.
Remember: the goal of this card is to build your credit rating. So dont fall behind with payments. Instead, use the card for regular planned purchases such as buying gas twice a month. Then pay the bill immediately after it arrives.
Have Someone Cosign For A New Credit Card Or Loan
Another idea is to have someone close to you cosign your loan. By making regular payments on the loan, you can nudge your credit score back up and into shape.
Your cosigner may be a relative or very close friend, but he or she should have a good enough credit score to make up for yours. They should also be aware that if you dont pay the loan, their credit score will suffer for it.
If you are unsure of your ability to repay the loan, its probably not worth it to risk dragging someone you care about into the mud with you. Cosigners will work best for those of you with steady incomes, who, if not for a poor credit score, would have little trouble securing and repaying a loan on their own.
Become An Authorized User On An Account
This means that someone else typically a close friend or relative adds you to their credit card account. Your credit can benefit from their positive account history and on-time payments, and your own preexisting credit history wont hurt theirs. You can use the credit card in your name, but youre not legally responsible for paying it off.
The flip side? Your credit may suffer from the primary account holders bad credit moves, and it may be hard to get removed from the account. Consider this credit-building method only if you trust the person to be responsible with the account.
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How To Build Back Your Credit After Bankruptcy
Rebuilding your credit after filing for bankruptcy can seem daunting, but there are some steps you can take to help your credit history begin to recover:
- Make sure all payments are on time going forward. Sometimes, the bankruptcy court will allow you to keep certain accounts open. If you still have open and active accounts that were not included in bankruptcy, be sure to make every payment on time.
- Open a new account. If you are starting from scratch with no remaining open accounts, it can be difficult to qualify for new credit after bankruptcy. Consider opening a secured credit card, getting a , or asking a friend or family member to add you as an on their credit card. Making small purchases and then paying the balance in full each month will help build a positive payment history, which in time can help offset the negative impact of the bankruptcy.
- Check your credit report frequently. Stay on top of your credit situation by reviewing your credit report often. You can also request your free credit score from Experian, which will include a list of the top risk factors impacting your scores.
- Sign up for Experian Boost. Adding your on-time cellphone, utility and streaming service payments with Experian Boost can help you increase your credit score so you can start to rebuild after bankruptcy.
What Are The Best Credit Cards To Get After Bankruptcy
- Green Dot primor® Secured Visa® Platinum Card : $39 annual fee, security deposit of $200 to $5,000
If you do use one of these cards, we recommend paying your balance in full well ahead of the due date. Some consumer complaints revolve around payment processing time ;so dont wait until the last minute.
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Get A Cell Phone On Contractcompanies Report Your Status To Credit Bureaus
Apply for a cell phone on contract. The big companies will report your payment habits to the each month. As you pay your bill in full and on time each month, it shows that youre managing money effectively.
You dont need a costly plan for this to help your credit. Paying your bill on a cheap contract every month will still show that youre using credit responsibly. Whats most important is to pick a plan that fits your needs as well as your budget.
Like all bills, pay your cell phone bill in full and on time every month. Acting responsibly with your payments goes a long way to repair bad credit.
Avoid Credit Repair Agencies
First of all, there’s nothing a credit repair agency can do that you can’t do for yourself. If you’re at a loss and need help, you can instead turn to any number of;web-based resources or books on credit repair. If incorrect or outdated information appears on your credit report, there are steps you can take to have it corrected. If the information on your credit report is negative, but still accurate, it cannot be permanently removed.;
Despite this, credit repair scams abound. These scammers usually take advantage of the fact that a credit reporting agency will remove disputed information for some time while the dispute is being investigated. The credit repair agency may dispute negative information, even though it’s accurate. With the disputed negative information temporarily removed from the report, your credit history can look much cleaner than it should look.
However, if the information is accurate, it will reappear on your report when the investigation is complete. Credit repair agencies make their money by charging on-going fees, often by monthly subscription. While you’re subscribing, the agency will continue to dispute negative information on your file, but this isn’t a permanent fix unless the information is truly inaccurate.
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New Credit Cards After Consumer Proposal
When you file a consumer proposal, you might not have to hand over all your credit cards to the trustee. Trustees have differing views on this.
Some are okay if you have a credit card with a zero balance on it, and if you are not using it at the time of filing, and while waiting for approval of your consumer proposal, they may allow you to keep it.
Now keep in mind even if this is your situation, there is nothing to stop your card issuer from cancelling your card, even if it is in perfect standing.
There is a decent chance they will find out about your consumer proposal and for many card issuers, thatll do it. Your card will be toast.
Also, please understand if this card you are hanging on to was issued by a credit card issuer who is already being affected by your consumer proposal the chances of them cancelling this clean card is pretty much 100%.
When you file your consumer proposal, youll wait forty-five days after you have filed to find out if your creditors accept your proposal as offered.
Most of the time, properly constructed consumer proposals are accepted the first time. If not, the debtor works with the trustee and the creditors to come up with a revised offer that suits all parties.
Once the terms of your consumer proposal have been accepted and approved in court, in my view you are free to turn your attention to rebuilding your credit score with new credit cards too.
Not every trustee feels this way.
S To Rebuilding Credit After Bankruptcy
You might think youre a pariah in the eyes of lenders and credit card issuers, but thats not quite true. Youll have to prove yourself, of course, but it can be done.
Although your goal building a good credit score is the s ame as that of someone starting from scratch, your situation is different. Your problem isnt that creditors dont know anything about you, but rather that they know a lot. Here’s how to start rebuilding your credit after bankruptcy:
How Long Does It Take To Rebuild Your Credit After Chapter 7 Bankruptcy
A Chapter 7 bankruptcy stays on the borrowers credit report for 10 years. This means that after 10 years, all records of the bankruptcy must be removed from your credit report. That said, the impact the bankruptcy has on a credit score decreases as time passesdue in part to the immediate reduction in the consumers debt-to-income ratio, which is how much you owe in relation to the amount of available credit you have. Because of this, you may start to see improvements in as little as one to two years after discharge.
Returning To Good Credit After Bankruptcy
A personal bankruptcy filing will affect your credit report for a certain amount of time depending on how you file:
- Chapter 13 bankruptcy stays on your credit report for 7 years after final discharge
- Chapter 7 bankruptcy stays on your credit report for 10 years after final discharge
Having a bankruptcy on your record for 7-10 years does not mean it will take you this long to repair your credit score or get out of debt.
Right away, the “final discharge” releases you from personal liability in most debts. You need this bankruptcy discharge before you can take steps to build toward better credit, otherwise, you will continue to have large debts.
Once the process starts, you can decide what choices to make to rebuild your credit.
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Start The Rebuilding Process
At this point, your pre-bankruptcy financial history raises red flags to lenders. All they see is risk, risk, risk, which will make it hard to get an 800 credit score after BK without making these essential moves.
We want to change their minds by taking a few key steps and providing extra assurance that they wont lose money.;
You can use these three financial vehicles to begin your credit restoration process:
What To Do After Your Bankruptcy Is Discharged
Once your bankruptcy is discharged, you should pull your credit reports from Equifax, Experian and TransUnion to confirm that your lenders are accurately reporting the discharge. Only the debts included in the bankruptcy filing should be reported as discharged. Also, double-check that all of those accounts included in the bankruptcy show a zero balance on your credit reports. After youve confirmed that your credit reports are accurate, you can then consider applying for a new credit card.
Even after your bankruptcy is discharged, it may take a while to qualify for a new credit card. Some credit card companies may reject your application simply because you have a recent bankruptcy on your credit report. Others may be less stringent because your risk of filing for bankruptcy again is low, since there are rules restricting when you can file for a second bankruptcy.
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Necessary Steps To Repair Your Credit After Bankruptcy
Bankruptcy is a fair, legal solution for Canadians who are overburdened with debt and have no other way out. However, it also negatively impacts creditworthiness for years, making it difficult to regroup financially. There are some moves that savvy individuals can make to recover from bankruptcy quickly, rebuild their credit, and regain lenders trust.
In This Article:
Action #1: Enroll In A Credit Building Program
Financial professionals can help you take the right steps to build your credit as fast as possible.
At 4 Pillars, we do things such as:
- Show families how to settle collection items
- Help them correct reporting errors
- Show them different financial products that can help rebuild their credit
- Explain how credit scores are calculated and analyze possible actions to take
If youd like us to review your file and suggest some actions to take, email your local 4 Pillars office.
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Other Factors That Affect Your Credit Card Application
- Income requirements. Most credit card companies specify the minimum annual income youll need to make to apply for a credit card. You may not be able to qualify for more premium credit cards with a lower income, while most basic credit cards require you to make at least $12,000 per year.
- Employment status. You may be required to show proof of employment to qualify for some after bankruptcy credit cards. In this case, you could show letters of reference from employers or pay stubs. Many credit card companies wont approve applications from people who dont have secure employment, even with a decent credit score.
- Other financial information. Each credit card issuer will have its own process to evaluate the risks involved in lending to you. Your bankruptcy will certainly be assessed along with your history of missed payments. Your provider may also ask for information about your current debts or assets.
Ask For Payments To Be Reported To The Consumer Credit Bureaus
If youre making on-time rent payments every month, why not let them boost your credit?
Ask your landlord to report your monthly payments to the three major consumer credit bureaus Equifax, Experian and TransUnion or let companies like RentTrack help take care of it for you.
But theres a caveat: Even if the information makes it onto your credit reports, not every credit scoring model actually uses that information. Certain credit-scoring models, like FICO® 9 and VantageScore® scores based on your Experian credit report, use available rental-payment information when calculating scores, and FICO® Score XD even uses reported cellphone and utility payments.
Unfortunately, you cant control which scoring model a lender uses to check your credit but you could ask about this before you apply for a new line of credit.
Apply For A New Line Of Credit
Adding a new line of credit can demonstrate that you can responsibly make on-time payments. In turn, itll help your credit score. However, when you apply for new lines of credit, the lender will do a hard pull on your credit. Every time you apply for new credit, your prospective lender accesses your credit report, says April Parks-Lewis, director of education and corporate communications at Consolidated Credit. Those inquiries can drag down your credit score.
As too many hard inquiries will ding your credit score, try to apply for credit lines you know you can qualify for. You can also apply to get prequalified, which results in a soft pull of your credit. When youre trying to build your credit after bankruptcy, here are some types of credit for you to consider:
Why this matters: A new line of credit can help you build your creditworthiness.
How to get started: Choose one of the options from above that fits your situation best and work on keeping that line of credit in good condition.
Whats A Good Credit Rating In Canada
The first thing to understand is what a good credit rating means.
In Canada, each credit reporting agency views the score a little differently. Here is a summary of the ranges. If interested, you can dig deeper into the differences with this article by the Financial Consumer Agency of Canada.;
Excellent Credit: 750+
Poor Credit: 600-649
Bad Credit: below 600
Poor credit ratingThis is the score youll find with young people starting their adult life with no credit history or if you have damaged your credit rating from previous financial difficulties.
Fair credit ratingA score of 650+ will usually mean you qualify for mainstream lending products and make it easy for you to get loans as long as you meet other criteria set by the lender, such as debt service ratio.
A score below 650 makes it hard to get new credit.
If you dont want to pay to check your credit rating, this tool gives you an estimated rating.
Here are a few examples of credit reports and credit scores in Canada.
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Life After Bankruptcy 10 Strategies To Rebuild Your Credit Score
Life after Bankruptcy ;10 Strategies to Rebuild your Credit Score
Bankruptcy inflicts financial misery on more than a million Americans every year. This is most damaging thing that can happen related to credit reports. A bankruptcy may be listed on your for up to 10 years and there is a good chance your credit score will be rather low until you take the necessary steps to rebuild your credit. Rebuilding your credit score after bankruptcies is the real way to get back on a better financial path.
Take necessary steps to rebuild;your credit score. But before that, it is important to understand why it is effective for creating a great financial future. While applying for car loans, credit card, the financial agency or say banks first looks at FICO score and credit history to determine the liability of applicant. If the FICO scores are amidst 700 or more, means you have good score, but if lies below, it needs rebuilding. Here are some suggestions for rebuilding FICO score after bankruptcy. Adopt these strategies to rebuild the score that all work, to some effect.
Summary: Rebuild your Credit Score