Evaluating Credit Card Offers
You will typically begin to receive new offers for credit after bankruptcy. However, be aware that many new credit card offers will have low limits, high-interest rates, and high annual fees. Reviewing the offer terms carefully before signing up for a new credit card after bankruptcy is essential. The goal is to accept a credit card with the highest possible limit because credit reporting agencies rate you based on your total available credit. Not only can lower limits can harm your score, but you’ll want to pay off the majority of your balance each month.
If you don’t qualify for a typical, unsecured credit card, you might want to start rebuilding your credit by getting a secured credit card from your bank. You’ll deposit a certain amount of money in the bank as collateral for the card. In exchange, you have a line of credit equal to the amount in the account. A secured credit card rebuilds credit because the creditor typically reports payments on your credit reportyou’ll want to be sure that will happen.
What Is Credit Reporting And How Does It Affect Me
In Canada there are two major credit reporting agencies Equifax and TransUnion. Most people commonly refer to these agencies as the credit bureaus. Credit reporting agencies do exactly that: they report credit history. They can also be referred to as an information service as they provide copies of your credit report to potential lenders. This allows the banks and other lenders to determine how much risk they are taking when they loan you money. Whenever anyone lends money they are taking a risk that it will not be repaid.
To get any significant credit, you need a good borrowing history.
Approximately once each month every major lender in Canada sends a report about their borrowers to the credit bureaus. Also, the federal Superintendent of Bankruptcy reports a list of everyone who filed a consumer proposal or bankruptcy to the credit bureaus, as well as a list of everyone who has been discharged. The credit bureaus collect this information, summarize it, and sell it to their members, the lenders.
When you apply for credit you normally sign an application that provides the lender consent to access your credit history. Generally this consent allows then access not only the first time you apply, but anytime afterwards as well, as long as your account is open. It is also this consent that allows the lender to provide the bureau information on your payments etc. once you have been approved.
Make Sure You Pay All Your Bills Early Or On Time
Your payment history is the most important factor that makes up your FICO score, accounting for 35 percent. With that in mind, youll want to make sure you pay every bill you have early or on time. Set a reminder on your phone if you have to, or take the time to set up each of your bills on auto-pay. Whatever you do, dont wind up with a late payment that will only damage your credit score further and prolong your pain.
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Equifax And Transunion Credit Reports
Both Equifax and TransUnion maintain a bankruptcy record on your credit report for a period from the date of your discharge or last payment.
For first-time bankrupts, TransUnion maintains the information for the maximum length of time permitted by provincial law , while Equifax retains the information for 6 years for every province.
Does Bankruptcy Wipe Your Credit Report Clean
Myth: All bankruptcy debts will be wiped clean from your credit report.
The truth: While bankruptcy may help you erase or pay off past debts, those accounts will not disappear from your credit report. All bankruptcy-related accounts will remain on your credit report and affect your credit score for up to seven years or as long as they normally would, though their impact will diminish over time.
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What Is A Credit Report
Your is created the first time you apply for credit or borrow money. It will contain information such as details about your credit cards and loans, including when you opened your accounts, how much you owe, when you make or miss payments, and if you go over your credit limit. A credit report also contains personal information such as if you have ever filed for bankruptcy.
How To Improve Your Credit After Bankruptcy
You may be disappointed to know that bankruptcy can stay on your credit report for a decade, and that theres nothing you can do to make your bankruptcy disappear any sooner. However, there are still plenty of steps you can take to recover from a bankruptcy much faster than many people realize.
If you want to be able to get a mortgage, finance a car or get approved for a line of credit in the years following a bankruptcy, consider these tips:
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Hire A Credit Repair Specialist To Deal With The Bankruptcy
This is obviously a lot of work, and it may seem a bit overwhelming. You may feel like its too much to handle with everything else going on in your life.
In that case, you may want to procure the services of a quality credit repair company. You could also hire a good bankruptcy attorney.
Granted, its never a good feeling when you pay out of pocket to fix something that wasnt your fault.
Taking it on by yourself can be a big challenge, though. It will cost you in terms of time and money.
Someday, fraud and cybercrime might be a thing of the past. But, for now, its a part of life that many of us have to deal with at one time or another.
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Consider Applying For A Secured Credit Card
After filing for bankruptcy, its unlikely that you will qualify for a traditional credit card. However, you may qualify for a secured credit card. A secured credit card is a credit card that requires a security depositthis deposit establishes your credit limit.
As you repay your balance, the credit card issuer usually reports your payments to the three credit bureaus. Repaying your balance on time can help you build credit. Once you cancel the card, a credit card provider typically issues you a refund for your deposit.
When shopping for secured credit cards, compare annual fees, minimum deposit amounts and interest rates to secure the best deal.
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Can You Remove A Bankruptcy On Your Own
Like all negative item disputes, its entirely possible to complete the process on your own. However, removing a bankruptcy from your credit report early can be a lengthy and tedious process that doesnt guarantee results.
You can dispute the bankruptcy either by stating an inaccuracy of the information on your credit report or by asking the credit bureau how it verified your bankruptcy. As with any dispute, they must respond to your procedural request letter within 30 days.
In most cases, theyll say that they verified it with the courts, but this is unlikely. You must then contact the court to ask how they verified your bankruptcy.
If they respond that they never verified it, you should get that statement in writing, send it to the credit bureau, and ask them to remove the bankruptcy.
This method isnt guaranteed, but it might be worth trying. Otherwise, enlist the help of a credit repair company to navigate the process for you.
Credit repair companies are highly experienced at disputing negative items on your credit reports. They specialize in getting bankruptcies deleted from your credit report. They also work to remove other negative information included in the bankruptcy, like charge offs and collections.
Hard Inquiry: Two Years
A hard inquiry, also known as a hard pull, is not necessarily negative information. However, a request that includes your full credit report does deduct a few points from your . Too many hard inquiries can add up. Fortunately, they only remain on your credit report for two years following the inquiry date.
Limit the damage: Bunch up hard inquiries, such as mortgage and car loan applications, in a two-week period so they count as one inquiry.
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How Can I Rebuild My Credit After Bankruptcy
The most important thing you can do to improve your credit score after a bankruptcy is remove the bankruptcy from your credit report.
Equally important is learning and changing your personal finance habits so that it doesnt happen again. This might involve reviewing your income and expenses or building your emergency fund to prevent future financial hardships.
The most important ongoing habit you can begin is to pay all of your bills on time because your payment history accounts for the largest portion of your credit score. Even a single 30-day late payment can cause a significant dip, so imagine how bad it could be if you regularly miss a payment.
Your other best bet for rebuilding your credit after bankruptcy is to avoid accruing new debt.
Depending on the type of bankruptcy filing, you probably had much of your debt discharged. So even though the bankruptcy itself is a major negative item on your credit report, consider the rest a blank slate.
Avoid racking up additional debt because that also has a significant impact on your credit score.
You may also want to get a secured credit card. Its a credit card designed for people who want to rebuild their credit. The credit card issuer will give you a credit limit based on the security deposit you pay upfront. By making monthly payments on time, you can start to rebuild your credit immediately.
How Are Delinquent Accounts Reported On Credit Reports
People who file for either type of bankruptcy may have accounts which have been delinquent for several months or even longer. The individual delinquent accounts are deleted seven years from the original delinquency date.
The delinquency date is the date the account first became delinquent. Filing for either kind of bankruptcy does not alter the original delinquency date nor does it extend the time the account remains on the credit report.
In most instances, since the account was delinquent before it was included in the Chapter 7 or Chapter 13 bankruptcy, it is likely to be deleted before the bankruptcy public record.
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Will A Bankruptcy Ruin Your Credit Forever
No, a bankruptcy will not ruin your credit forever. When you first file for bankruptcy your credit score will take the biggest hit. As the bankruptcy ages, your credit score will improve so long as you responsibly borrow and make timely payments. Also, a bankruptcy only remains on your credit report for 10 years. After the 10 year period, the bankruptcy will be removed and your credit score will increase.
What Do You Need To Disclose If You Apply For A Loan After Bankruptcy
If you do apply for a loan above a certain limit you must let the lender know about your bankruptcy. This limit is indexed quarterly. At the time of writing, the indexed credit limit set in the Bankruptcy Act and regulations is $5,881. This means for loans worth more than $5,881, you must disclose your bankrupt status when:
- seeking to obtain goods or services on credit, by hire purchase, or cheque
- leasing, hiring, or promising to pay for goods and services
- seeking to obtain an amount by promising goods or rendering services
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How Does A Bankruptcy Affect Your Credit Score
Having a bankruptcy on your credit report can be devastating to your credit scores. According to FICO, for a person with a credit score of 680, a bankruptcy on your credit report will lower your credit score by 130-150 points.
For a person with a credit score of 780, a bankruptcy will cost you 220-240 points. That one event immediately drops you several categories lower and impacts your ability to access credit, and yes, the higher your initial credit score is, the more it falls.
You might not be eligible for future loans or credit cards, and if you are, youll most likely end up paying much higher interest rates. Not only that, the amount you can borrow will probably become limited.
While filing for bankruptcy may be the best financial decision at this point in your life, its still important to understand how and why it affects your credit score.
How Long Does A Chapter 13 Bankruptcy Stay On Your Credit Report
A Chapter 13 bankruptcy stays on your credit reports for up to seven years. Unlike Chapter 7 Bankruptcy, filing for Chapter 13 bankruptcy involves creating a three- to five-year repayment plan for some or all of your debts. After you complete the repayment plan, debts included in the plan are discharged.
If some of your discharged debts were delinquent before filing for this type of bankruptcy, it would fall off your credit report seven years from the date of delinquency. All other discharged debts will fall off of your report at the same time your Chapter 13 bankruptcy falls off.
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Can A Chapter 7 Be Removed From Credit Report Before 10 Years
A chapter 7 bankruptcy can only be removed from your credit report before the 10 year period if there are any inaccuracies in the information thats reported. You cannot remove a bankruptcy from your credit report simply because you dont want it to be there. Most people will have to wait the 10 years before the bankruptcy falls off their credit report on its own.
How Long Does It Take To Repair Credit After Bankruptcy
Some have reported obtaining a credit score in the high 600s to low 700s within two years after filing for bankruptcy. The best way to repair your credit after filing for bankruptcy is to open a secured credit card and establish a good payment history. Within a year apply for another credit card and maybe take out an auto loan. Make all of your payments on time and you should have a fair credit score within 24 months of filing for bankruptcy.
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When Is A Good Time To File For Chapter 13
Today, the most common reason that people file for any kind of bankruptcy is medical expenses. This sad fact has not gone unnoticed by politicians and activists who claim that our health care system is broken. Once a creditor obtains a judgment against you in court, they can make your life a living hell. Not only can they garnish your wages, they can also place a levy on your bank account which allows them to freeze your funds. At that point, they can petition the court to transfer those funds over to them.
Additionally, they can place liens on your real estate. If you own properties other than your legal residence, they can force the sale of the properties to repay the debt that theyre owed. In other words, right about the same time they threaten to sue you and you know that theyre going to win that judgment, its a good time to start considering filing for bankruptcy.
Once in bankruptcy, your creditors hands are tied insofar as using aggressive tactics are concerned. Essentially, you have regained control of the situation and you can work out a repayment plan that works within your finances and prevents your creditors from seizing your money or property.
Bankruptcy Information Can Be Wrong
You may want to hire a credit repair attorney if your record shows inaccurate financial or bankruptcy information. They can speak with credit reporting agencies, credit card companies, or credit card issuers if you are having personal finance trouble. An attorney can also step in if a company does not discharge your debt correctly or you fall into a credit counseling scam.
Remember: A bankruptcy discharge legally stops creditors from harassing you. You have rights if a company is not following the process or respecting your bankruptcy filing.
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Check Your Credit Report
Check your credit report every few months to be aware of the factors influencing your credit score. Compare each entry in the report to your own financial records to ensure that debt balances and account histories are accurate. Dispute any inaccurate or fraudulent listings in your report as quickly as possible to avoid negative impacts. Personally contact any companies that have legitimately listed defaults or missed payments, and work with them to establish repayment plans to avoid further negative reports. Read More:How Long Does a Foreclosure Stay on Your Credit Report?
You Can Improve Your Credit After Bankruptcy
Dont give up after youve filed for bankruptcyyou can improve your credit score. But be patient, because it could take some time. If you want a little extra help, sign up for our free , or consider ExtraCredit. Restore It, a feature on ExtraCredit, gives you an exclusive discount to one of the leaders in credit repair. They can help you work to get your score where you want it to be after youve filed for bankruptcy.
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Get Your Bankruptcy Removed Professionally
In some cases, we recommend speaking with a Credit Repair professional to analyze your credit report. It’s so much less stress, hassle, and time to let professionals identify the reasons for your score drop.If you’re looking for a reputable company to increase your credit score, we recommend Credit Glory. Call them on or setup a consultation with them. They also happen to have incredible customer service.Credit Glory is a credit repair company that helps everyday Americans remove inaccurate, incomplete, unverifiable, unauthorized, or fraudulent negative items from their credit report. Their primary goal is empowering consumers with the opportunity and knowledge to reach their financial dreams in 2020 and beyond.