How to recover from bankruptcy by fixing bad credit scores

How to recover from bankruptcy by fixing bad credit scores

In order to recover from bankruptcy, it is important to proactively seek to improve credit for a better credit score. An adverse credit history not only makes borrowing money more difficult, it could also increase the cost of insurance and make it more difficult to get certain jobs. Chapter 13 and chapter 7 bankruptcy will show on personal credit reports for 7 and 10 years, respectively. However, credit repair after bankruptcy means that a higher credit score can be achieved in a fraction of the time.

Fixing Bad Credit By Removing Credit Report Errors

It is a reality for many discharged bankrupts that some of the debts that have been eliminated by filing for bankruptcy still show as open, overdue financial obligations. The amount of money owed is a vital factor so it is important to get any issues corrected as soon as possible.

  • Request a free credit report for Experian, Equifax and TransUnion and request that these errors are removed under the Fair Credit Reporting Act. Check the records for each credit reference agency as each set of records is completely different.
  • Provide the credit reference agency with any paperwork from the bankruptcy agreement. This is proof that the debt has been eliminated and should no longer show as active.
  • Although not necessary, the services of a credit repair attorney can achieve the same objective. This can be useful if certain creditors are proving unhelpful. A variety of services are offered for a set monthly fee.

Recover from Bankruptcy By Paying Other Debt Punctually

If a better credit score could never be achieved again, there would be no incentive to ever pay a bill on-time again. Whilst filing for bankruptcy will cause a score to plummet, credit repair after bankruptcy can be achieved by repaying new and existing credit arrangements on-time.

  • Installment debts. Whilst most unsecured debts will have already been written-off, certain secured debts – mortgages and car loans – will have been reaffirmed under the 2005 bankruptcy laws. Continue to make timely repayments in relation to these debts and student loans and this will lead to a higher credit score.
  • Revolving debts. Consider getting a secured or unsecured poor credit card as a source of revolving debt will help with fixing bad credit scores. Avoid using more than 30% of the overall credit limit in any one month – less than 10% is optimal.
  • Fixing bad credit scores will happen more quickly if timely repayments are made towards a source of both installment and revolving debt.

Credit Repair After Bankruptcy Means Qualification for Finance

Although it is possible to recover from bankruptcy more quickly, this won’t happen overnight. Although credit history repair is a gradual process, it is possible to qualify for secured credit cards, poor credit car loans and cash advances from specialist lenders straight away. The problem is that the high risk of default means that the APR is normally extremely high. After a period of 2 to 3 years of fixing bad credit scores, it may also be possible to get a bad credit mortgage.

Do Credit Repair Credit Cards Really Work

When someone has a poor credit history, borrowing money becomes far more difficult. Although it is still possible to get a loan from a pawnbroker, credit union or payday lender, refinancing through mainstream providers can represent a real challenge. However, credit history repair can be achieved with a credit repair credit card over time. Lenders are trying to assess how reliable a new customer is which is why they turn to credit scoring. The more time that passes without a missed or late payment, the higher that person’s credit score will be.

How Credit History Repair Works

Once a series of punctual repayments have been received by the lender, that person could qualify for credit in the future. Each payment that is received on time will be reported to the three major credit reference agencies (Experian, Equifax and TransUnion). It is important to understand that a credit repair credit card isn’t a magical system for repairing credit. It will take time to recover from a low credit score, especially following chapter 7 bankruptcy. However, it will help to improve credit scores far more considerably.

What is a Credit Repair Credit Card?

A credit history repair card is specifically designed for non conforming borrowers who wouldn’t be eligible for mainstream financial products. Bad credit equates to greater risk for the lender and this will be reflected in the low credit limit, rate of interest and/or charges. Once six repayments have been received punctually, it is normally possible to request a credit limit increase. A poor credit credit card works in the same way as a normal card so merchants won’t be able to tell the difference.

How Long Does it Take to Rebuild Credit Ratings?

Each payment that is made on time will help the borrower to recover from a low credit score. It can take as little as six months to repair any damage from late repayments and other minor breaches. Chapter 7 bankruptcy and mortgage repossession will have a more serious and lasting effect. However, it may still be possible to qualify for a bad credit mortgage deal within two to three years. Filing under chapter 7 will continue to show on a credit report for a period of 10 years.

Other Ways to Improve Credit Scores

Whilst a credit repair credit card can help with credit history repair, it isn’t necessary if other active credit agreements are available. This includes paying the mortgage, personal loans or a car loan. A number of credit reports contain erroneous data so it is important to check that the information is accurate. Don’t make too many applications for credit as each search will show on a credit report for 12 months.