Bankruptcy can feel like the worst thing when it comes to your credit. After all, you will be stuck without one for up to 10 years. But it is very possible to build up decent credit score while you’re waiting for your bankruptcy to age off of your report.
Barry Paperno, a credit scoring expert at FICO, states that if you do all the right things, then it is safe to say that you could have a 700 credit score in 3 to 5 years. Below are some steps that you can take to get yourself back on track and increase your odds at getting new loans.
Check your credit reports
Of course, bankruptcy is going to cause damage to your credit score. But, assuming that you don’t get into any more financial trouble afterwards, your score should start to recover. Plus, having those debts discharged may actually make you more creditworthy than before.
In order to go through this credit healing process, you will need to ensure that your bankruptcy has been reported to the three major credit reporting agencies correctly. That is why you want copies of your credit report after the bankruptcy is complete.
You want to ensure that your bankruptcy-related accounts have a zero balance and are labeled as discharged, so that the lender will know that you have additional income to spend now. These notations may make it a bit easier to get a new credit line that will help you rebuild your credit score.
Build up a positive payment history
Rebuilding after bankruptcy is all about the positive points. The most important thing that you can do in order to recover as fast as possible is to simply pay your bills on time. Building up a positive payment history will help you offset your bankruptcy over time. Make small purchases and then pay the balance in full every month to be able to get positive on-time payments.
Shop around for starter credit
If you don’t have any type of accounts open after you file bankruptcy, consider getting a credit builder loan or secured credit at a local credit union or bank. These types of credits are specifically issued out to help people fix their credit scores. For example, secured credit cards have a cash collateral deposit that serves as the credit line for the account.
Don’t go crazy trying to search for new credit
You have just gone through bankruptcy, so the lenders will want to know why you are trying to gain a new credit, especially if there is more than one. The question that you need to ask yourself is “am I making the same mistakes that could land me back in bankruptcy?” Having just one account with a low limit will be fine to begin rebuilding positive credit score history. Over time, your bankruptcy accounts will get removed from your credit report, which will leave just the positive payment history that you have built over the years.
Check out our other articles for more information on how to get loans in difficult situations. And don’t forget to share your personal borrowing experiences in the comments section below!