Credit Repair After Bankruptcy
Each person’s credit history is rated and the score, usually between 400 to 900, reflects that person’s financial health. A low score means you are in poor financial condition, while a high score reflects your excellent financial health. The score you receive is used by lenders, insurance companies and landlords, among others, to determine whether and how much to loan you money or authorize the use of a credit card and what interest rate to charge for the loan.
There are several factors that determine what credit score you receive. The most important factor is your payment history. If you pay late, had an account sent to collection or charged-off, your credit score will be lowered. Conversely, if you pay all debts on time, your credit score will be raised. The next major factor in determining your credit score is the total amount of your outstanding debt.
If you owe many creditors and are close to the maximum credit limit on each card your score will be negatively affected. Other factors considered include the duration of your credit history. A younger person with little or no credit history will have a lower score than someone who has had accounts for more than five years. If you have recently applied for multiple new accounts, each application will be noted on your credit report and will lower your score. The types of credit you have will also affect your credit score. For example, a person with a mortgage and car loan will score higher than someone with only credit card accounts. Obviously, filing for bankruptcy and having your debts discharged will lower your credit score.
There are several things you can do to raise your credit score after filing bankruptcy. First, you should get a copy of your credit report by contacting the reporting companies, Experian (888-397-3742), Transunion (888-503-0048) and Equifax 800-685-1111. Review the reports carefully. If you notice any inaccuracies or mistakes, contact the reporting agency and let them know what item in the report is not accurate or is outdated. The agencies have 30 days to investigate and correct the alleged mistake. They are not obligated to investigate frivolous complaints. They will not correct or change any negative information that is accurate, notwithstanding the claims of certain credit repair companies.
One of the main things you can do to rebuild your credit is to pay all nondischarged debts on time such as your mortgage, car note or student loan. All future bills, such as new credit cards should be paid on time. You should get one secured credit card after you file, use it to make small purchases, and make sure to pay the bill on time.
Over the course of time, you should build up the credit limit and make sure to pay the entire balance each month. Do not apply for more than one or two credit cards, including store credit cards. Keep the credit accounts in good standing for a long time. Finally, do not apply for loans or increase your credit limit for more than you will be able to repay at the end of the month.
If you follow these steps your credit score should be raised. After following these steps for two years you should be able to get a loan at the regular rate of interest. The information in this article is general and each situation is different. You should consult a credit counselor or an attorney for specific information for your case.