Tuesday, September 27, 2011
Repairing Your Credit After Bankruptcy
The recent recession has spurred a huge national increase in bankruptcy, with nearly 1.5 million people filing in 2010. There is no doubt that filing for bankruptcy has a dramatically detrimental impact on the filer’s credit rating, but it is important to keep in mind that with the right financial decisions, there is hope that the credit rating can be improved.
For many, the prospect of boosting their credit rating seems unattainable and their financial picture seems bleak – they have been denied mortgages, have been offered exorbitant interest rates on car loans, and have had little or no chance of getting any affordable credit whatsoever. What many consumers don’t realize is that while a bankruptcy remains on a credit report for seven to ten years, there are steps they can take to improve their credit rating and reestablish creditworthiness within 12 to 18 months.
One of the first steps a consumer should take is to correct any reporting errors that may appear on a credit report. Obtaining a copy of one’s credit report will enable the consumer to see the full effect of the bankruptcy on his credit rating, but it will also allow the opportunity to correct any mistakes that will perpetuate an already difficult financial situation. Often liabilities that were supposed to be discharged as a result of the bankruptcy were overlooked, and it is up to the consumer to contact the creditors and the credit bureau to ensure that the information is updated.
Consumers hoping to repair their credit in the face of a recent bankruptcy must also be sure to remain current on existing credit obligations. Bankruptcy wipes out many of a filer’s debts, but he might still be on the hook for student loans, child support, and in many instances, mortgages. Staying on top of those non-discharged debts and ensuring payments are made on time will bump up a credit rating.
Another method for boosting one’s credit has just newly emerged: paying rent. Recently the credit reporting agency Experian has stated that it will include rental histories in its credit profiles. Check with your rental company to see if it reports its rental data to Experian – many bankruptcy filers with scores of less than 500 whose rental data was reported saw their scores jump to over 600.
Consumers may also improve their credit rating by using a secured credit card. By putting down a specific amount, say $500, a bank or creditor will issue a credit card authorized for that amount – making regular payments and ensuring that the balance is under control will definitely improve a lower credit score.
While none of these are cure-all solutions, a consumer who is conscious of these possibilities will be in a much better position after a bankruptcy than those who remain oblivious. With a proactive approach, good credit after a bankruptcy is definitely within reach.