How To Get Credit Score Up After Bankruptcy

How Will Bankruptcy Affect My Credit In 2021

5 minute read ⢠Upsolve is a nonprofit tool that helps you file bankruptcy for free. Think TurboTax for bankruptcy. Get free education, customer support, and community. Featured in Forbes 4x and funded by institutions like Harvard University so we’ll never ask you for a credit card. Explore our free tool

In a Nutshell

Filing bankruptcy does not ruin your credit forever! If you need debt relief but are worried about how a bankruptcy affects your credit rating, this article is for you.

Written by Attorney Andrea Wimmer.

• Let’s Summarize…

Increase Your Credit Mix

Your credit mix is the variety of loans in your credit file. How well you manage that blend is reflected in your credit score. Your mix of credit can count for as much as 10% of your overall score. Companies such as RentTrack or RentReporters allow you to report your on- time monthly payments to the credit bureaus. This can increase your credit by 5070 points in a few months. Other options include small, so-called “credit builder” loans, which allow you to repay manageable principal amounts of $500 to $2,000 over a few years. This can help you build confidence in your money-management skills as you gradually increase your credit score further.

How Long Does It Take To Rebuild Credit After Chapter 7

A bankruptcy stays on your credit report for 10 years. However, former bankruptcy attorney Kevin Chern says that when a person files Chapter 7 liquidation bankruptcy, the debtor immediately and dramatically reduces their debt-to-income ratio, which could set the stage for a rising credit score a year or two down the line.

You also eliminate your ability to qualify for Chapter 7 for another eight years, says Chern, who is the CEO of Help Path, a resource for individuals to receive a free consultation from a bankruptcy attorney. In the eyes of a potential lender, you may actually appear to be a better risk immediately.

You May Like: How To File Bankruptcy In Illinois

Check Your Credit Reports

Until April 2021, you can check your reports weekly for free on AnnualCreditReport.com. Your credit scores are calculated using information in your , so any inaccurate negative information can make it even harder for you to dig out of debt. If you find mistakes, dispute credit report errors and get them corrected.

Of course, there will be negative information that is accurate. Bankruptcy wipes out or reorganizes debts, but it doesnt wipe your credit reports clean. Your reports will show a Chapter 7 bankruptcy for 10 years, or a Chapter 13 for 7 years. Late payments and debts that go to collection also remain on the reports until seven years after the delinquencies. You’ll just need to wait for that information to age off of your reports.

Other Tips To Help Fix Your Credit After Bankruptcy

Heres some more advice on how to revive your credit score after bankruptcy:

• Avoid : Dont fall for con artists who claim they can remove a bankruptcy from your credit report. Nobody can remove bankruptcy from a credit report before the allotted 7-10 years have ended.
• Avoid frequent job changes, if possible: Your state of employment has no direct effect on your credit score, but lenders may put less faith in borrowers drifting from job to job.
• Keep account balances low: From where the credit bureaus stand, maxed out credit cards are a sign of strained finances. Aim to keep your credit utilization ratio below 30%. Also, keeping your balances low will lower your debt-to-income ratio , which in turn will amplify your shot at landing a low-cost loan.
• Not applying for new credit often: Lenders and credit bureaus take note when borrowers rapidly apply for credit. Its not a good look. It makes you look desperate, which makes you look risky. Remember, lenders abhor risk.
• Saving money: This one is less about restoring your credit score and more about making sure youre financially sound. If youre dealing with the consequences of bankruptcy, youre probably not in the best financial shape to handle surprise medical bills or unforeseen car troubles. Saving a little money from your paycheck every week can bridge the gap when you need it most. It doesnt take a fortune to mitigate misfortune. Three to six months worth of living expenses should do the trick.

Read Also: How Many Times Did Donald Trump File For Bankruptcy

Apply For A Secured Credit Card:

Secured credit cards are given against a fixed deposit. The limit of the credit is a certain percentage of the amount that you have kept as fixed deposit. This will help you fix a bad CIBIL score and once you have the credit card, make sure that you make all the payments on time but spend regularly on the card and stay within your credit limit and always make monthly payments on time. Do not ever allow a late payment or default on other loans if you have any. You must constantly use the credit card to ensure that your increases. ICICI Bank and Axis Bank offer these in India.

The 3 Best Credit Cards After Bankruptcy And What To Know Before Applying

Advertiser Disclosure

Advertiser Disclosure: ValuePenguin is an advertising-supported comparison service which receives compensation from some of the financial providers whose offers appear on our site. This compensation from our advertising partners may impact how and where products appear on our site . To provide more complete comparisons, the site features products from our partners as well as institutions which are not advertising partners. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.

Editorial Note: The content of this article is based on the authors opinions and recommendations alone. It may not have been reviewed, approved or otherwise endorsed by the credit card issuer. This site may be compensated through a credit card issuer partnership.

One of the many side effects of bankruptcy is the impact it makes on your ability to qualify for a credit card. Getting a credit card after bankruptcy isn’t impossible, but it may be difficult due to the long-term damage bankruptcy does to your credit score. This can be frustrating for bankruptcy filers, since responsibly utilizing a credit card is one of the ways you can repair your credit. Fortunately, there are still options for people who are recovering from bankruptcy, such as becoming an authorized user on another person’s account or opening a secured credit card in your own name.

Don’t Miss: Can You Rent An Apartment If You File Bankruptcy

Can I Improve My Credit Score After Bankruptcy

Even though bankruptcy remains on your credit report for up to ten years, you can start rebuilding your credit right away. Credit scoring companies look at several factors when computing your scores:

• your payment history
• your outstanding debt
• the length of your credit history, and
• how much new credit you’ve applied for.

You can start to improve your credit after bankruptcy by making all of your payments on time. Keep your debt load low, especially as compared to your available credit. And when you are ready, get a credit card, make small charges, and pay the bill off in full every month.

Build Credit By Exiting Consumer Proposal

If you opted for consumer proposal instead of bankruptcy, you know that it can take up to five years to exit consumer proposal and begin rebuilding your credit. A good way to speed up this process is to apply for a consumer proposal loan. This loan pays off your creditors and lets you exit consumer proposal, and then helps you build credit by reporting your monthly payments to Canadas credit reporting agencies.

Don’t Miss: Can You Be Fired For Filing Bankruptcy

The Effect That Bankruptcy Has On Getting A Job Or A Home

Some credit card lenders may be willing to take a chance on extending you a small line of credit, but it will be virtually impossible to get a home mortgage at least immediately.

Current regulations make it almost impossible to get a home loan unless at least two years have passed since the filing of a chapter 13 bankruptcy, or four years after the discharge of chapter 7.

The good news is that you dont have to wait the full 7 to 10 years.

But there are a few more bankruptcy speed bumps to deal with.

For one, it may be really difficult to rent a place to live. Landlords are a skittish lot.

If you have a bankruptcy on your record, youre going to have to do some out-of-the-box thinking in order to convince a property owner to do business with you.

When it comes to employment, the situation is a little better, but not much.

There are laws that are supposed to stop employers from discriminating against people who have a bankruptcy on their record but these regulations may be hard to enforce.

Its on your record and the company you are interviewing for sees it. They may not hire you because of the black mark without admitting it and tell you they are hiring someone else for another reason.

And if the position you are applying for involves financially sensitive information, your would-be boss can show you the door without thinking twice.

About Bankruptcy Proceeding Release

Being released from case of bankruptcy way you might be no more broke. Officially it signifies youre released from responsibility beyond doubt credit through Certified phone .

You need to understand that British bankruptcy laws says that certain financial obligations may not be automatically authored switched off as part of your bankruptcy proceeding discharge. These credit include:

Recommended Reading: Can You Lease A Car After Chapter 7

Tips To Improve Your Credit Score After Bankruptcy

Before you start taking steps to fix your credit score, it is important to know what the score is and why its so important to your financial future. When you apply for any type of credit credit cards, car loans, mortgage or rental agreements, student loans the financial agency first looks at your credit history to determine if they should lend to you or not. Many lenders use FICO scores as part of those decisions. If your FICO scores are in the mid 700s or above, that generally means you have good credit and it shouldnt be difficult for you to get approved, provided you meet lenders other requirements.

How Do I Improve My Credit Score?

It is important that you understand what happens when you file a bankruptcy. A bankruptcy can remain on your credit report for up to 10 years and there is a good chance your FICO score will be low until you have started rebuilding your credit. You can take the following steps to start raising your scores after bankruptcy.

1. Review Your Credit Report

The first step is knowing where you are and where you need to go. You should obtain a copy of your credit reports and make sure there are no errors or inconsistencies. You can try Credit.coms free Credit Report Card for an overview of your credit standing and an explanation of how its broken down, and you can request one free copy of your credit report per year from Equifax, Experian and TransUnion at AnnualCreditReport.com.

2. Pay Bills on Time

3. Apply for CreditCautiously

How Often Can You File For Bankruptcy

You can file for bankruptcy protection as many times as you need. But there are time limits between filing dates determined by the US Bankruptcy Code, based on what Chapter you file under. The time starts on the date you filed the bankruptcy case. For example, consider the following time differences between the following Chapters.

• Chapter 7 bankruptcy Chapter 7 bankruptcy: Eight years

This bankruptcy has the most extended amount of time required by the Bankruptcy Code. But Chapter 7 bankruptcy offers the fastest form of debt relief via bankruptcy filing. And it doesnt need the consumer to complete a repayment plan before getting their bankruptcy discharged.

• Chapter 13 bankruptcy Chapter 7 bankruptcy: Six years

You may ask, how long does bankruptcy stay on the credit report? Theres a possibility to waive the waiting period earlier. For example, if you paid back 100%or in some cases at least 70%of your total debts to the unsecured creditors in your Chapter 13 plan, the waiting period can be waived. Moreover, since the repayment plan of Chapter 13 can take up to five years to complete before becoming discharged, theres a possibility to file Chapter 7 bankruptcy about one year after you receive your Chapter 13 discharge.

• Chapter 7 bankruptcy Chapter 13 bankruptcy: Four years

• Chapter 13 bankruptcy Chapter 13 bankruptcy: Two years

Don’t Miss: How To File Bankruptcy In Wisconsin

Apply For New Credit Cards

After using a secured credit card, demonstrating new financial habits, and building up your credit score, the next step is to begin researching options for an unsecured card. When considering card options, keep in mind that the card issuers might have strict bankruptcy eligibility conditions, requiring card applicants to be bankruptcy-free for a certain number of years before approval. Not reading the fine print before applying for an unsecured card risks a denied application, which further hurts credit. However, take note that many modern lenders are surprisingly lenient with previous bankruptcies. American Express, for instance, previously required applicants to be bankruptcy-free for seven years prior to application. This policy has now been reduced to two years.

When applying for unsecured cards, focus on cards with low interest rates and annual fees, as well as flexibility for applicants on their road to financial recovery. We recommend the MBNA TrueLine MasterCard, which offers rates ranging from 5.99%-14.99% and no annual fee at all. Another excellent option is the Essential card from AmEx, with 8.99% interest and a balance transfer promotion for 1.99% over the first six months.

Bankruptcy Discharge What Happens Next

If you declare yourself bankrupt, or youre declared bankrupt, youll usually be discharged 12 months from the date the bankruptcy order was made.

The discharge process is automatic and will usually come to an end after a year. However, if youve not cooperated and been completely honest with your official receiver or trustee, or youve not acted responsibly during your bankruptcy, it might not end at this time. This is known as a delayed discharge or suspended discharge and can extend your bankruptcy for up to 15 years.

Once youve been discharged from your bankruptcy, youll be free of some of the financial restrictions imposed by the order, meaning:

• You can now act as a company director, unless there is another reason why you cant hold that position.
• You no longer have to worry about any assets, pay rises, bonus payments or other windfalls being used to pay creditors. An exception to this is any payment protection insurance mis-selling compensation payments, from claims made before your bankruptcy.

Its worth noting that you wont be sent confirmation of your bankruptcy discharge, but you can get proof of your discharge by getting a free confirmation letter by calling discharge queries on 0300 678 0015.

Here are some useful next steps for after bankruptcy:

You May Like: Can You Be Fired For Filing Bankruptcy

How Does Bankruptcy Affect My Credit Rating

Your credit report is maintained by one of two major credit rating agencies in Canada: Equifax and Trans Union. When you apply for a loan, whether a credit card or a mortgage, your lender will review your credit report. This report contains information about whether or not you have unpaid bills, how much credit you have outstanding and even how many times you have applied for credit.

If you file for bankruptcy a note will appear on your credit report indicating that you have done so. This information is provided to the credit bureau by the federal Superintendent of Bankruptcy. Each month they provide a list to the credit reporting agencies of everyone who has filed or a . It is important to understand that it is not your trustee advising the credit bureau of your bankruptcy, or your discharge. Rather it is part of the process completed by the Office of the Superintendent of Bankruptcy. They also provide a list of people who have been discharged.

What To Do Next

Start thinking about new credit: After six months to one year, you will probably be safe to think about new credit. Just like any other financial portfolio, diversification is the key. It is not enough to have only credit cards.

The most important thing to remember is whether it is a small personal loan that you take out or a car to get to work, make sure it is the smallest loan possible. This ensures that you can pay it back on time and avoid interest charges or a late payment on your shiny new credit report.

Get a Secured Credit Card: A secured credit card is a revolving credit type and is used to pay for emergencies, vacations, special needs when you do not have cash. Make sure you only spend 30% of the limit given and pay it off on time. A secured credit line can be obtained from your bank or from a third party creditor that have cards made specifically for rebuilding purposes.

The steps for obtaining secured credit is easy. Research and choose the card that is best for you or simply walk into your local bank branch. Pay an amount that the card company keeps as collateral in case of a default. One important note is, you should be certain that you never, ever use that money.

Get a Credit Builder Bank Loan: Ask if your bank lends money that is put into a secured account that you may not have access to. Once the loan is paid off you may then access the funds. This is a little known way of rebuilding credit without a credit card or to help diversify your credit history.

Read Also: Fizzics Company Worth