Improving a low credit score to rebuild credit after bankruptcy is tough, but it is possible. It takes patience, a solid plan and follow through to succeed, but many bankruptcy filers successfully lift their credit score post-bankruptcy. After filing for bankruptcy, the first step towards improving credit is to prove credit-worthiness.
Improving Your Credit Score Post-Bankruptcy:
- Review Your Credit Report. After the discharge is received, you are not responsible for any of the debts included in your bankruptcy. But it is your responsibility to double check that this is accurately reflected on your credit report. Get copies from Equifax, TransUnion and Experian and check that the bankruptcy and the discharged debts are being reported accurately. Look for duplicate entries (debt that was sold to a collection agency, etc.), debts included in the bankruptcy that are still listed as active and owed, outstanding judgments that should have been removed as part of the bankruptcy, etc. If there are any errors, send in a written dispute to the credit bureau so the information can be updated.
- Take Control of Your Finances. Make a budget and stick to it. Once you have figured out your finances, set up a system to ensure that everything gets paid on time every month. 35% of FICO scores are based on how responsible you are in paying your bills each month. When attempting to improve your credit score post-bankruptcy, avoiding new late payments and/or missed payments should be a top priority.
- Get a Secured Credit Card. Start by getting a secured card. With a secured credit card, the account holder is required to deposit cash with the card issuer that “secures” an equal amount as a credit line. (The amount typically falls between $200 and $500). After several months of making payments on time, many secure credit card holders can graduate to an unsecured card. When obtaining a secured credit card, make sure that the account will be reported to the major credit bureaus.
- Consider Obtaining a Personal Loan. Some recent bankruptcy filers take steps to improve their credit by taking out a small, personal loan from their credit union or bank. Even if the amount borrowed is only a few hundred dollars, if it is paid back on time within a few months, it can boost the borrower’s credit score.
- Avoid Credit Repair Services. The cost is usually significant, and the promises are typically empty. Best case scenario is that you will pay for information and tips that you could gather from a credit counseling service for free. Worst case scenario is that you will get involved in a scam that could leave your credit more damaged than it was before they got involved.
- Our clients are provided a complimentary referral to a program or professional that will provide specific coaching to re-build your credit score.
If you have questions about filing for bankruptcy or about preparing for life after bankruptcy, contact Dolen, Tucker, Tierney & Abraham. Our bankruptcy and estate planning attorneys are well equipped with both the knowledge and the experience you want on your side.