While debtors who previously filed bankruptcy with a clean credit record may rebuild credit in just a few months, if you have bad credit, you still have options to raise your credit score by following proven methods. This article explores how you can improve your credit scoring at a faster rate. 

Contrary to popular belief that a Chapter 7 bankruptcy stays on a debtor’s credit report for 10 years, its impact on a creditor’s record is actually lessened as time goes by. This means that it would be best to start improving your credit as soon as your bankruptcy case is over.

How Bankruptcy Affects Credit Ratings

In a Chapter 7 bankruptcy case, the filer’s credit score can get reduced by up to 200 points. Increasing the score to a good credit rating (equivalent to having a score above 600) would usually take around two years after bankruptcy. 

Most filers are misled with the notion that building your credit is more difficult after bankruptcy, or that it can only be attained after seven years, when in fact it’s much easier to do so than prior to the bankruptcy. 

When your debts have been piling up and creditors are already after you, filing bankruptcy won’t likely have much effect on your credit. In fact, it can just give you the financial relief you need to start over and build your credit from scratch as there are no more financial obligations or outstanding accounts to worry about. If you have a low credit score, to begin with, there is nothing much to lose when you declare bankruptcy.

Restoring Credit Score Post-Bankruptcy

credit score after bankruptcyIf you want to achieve a good score, you need to show that you are capable of loaning small amounts of money and having a timely payment for what is owed. As simple as getting a gas card and responsibly sending monthly payments on time can serve as evidence. But if attaining a high or even excellent credit score at the fastest time possible is your goal, consider the following methods:

  • Check your credit score. Note down your credit after bankruptcy since this will serve as your baseline when checking your progress. Make sure to conduct credit monitoring every month, or as often as you can.
  • Get a secured credit card. This is the same as when you apply for credit cards, except that a deposit is placed from which you can charge future purchases. In other words, your credit limit is dependent on the amount deposited to the account. A secured card is preferred over an unsecured card since you’re only charged what you have prepaid which prevents unnecessary ballooning of loans and interest rates. Make sure to use your credit card on a monthly basis and to pay off your card balance on time. For every credit repayment, you perform each month, your credit score increases. 
  • Live within your means. Start by creating a budget and accounting for all regular expenses such as mortgage or rent, car or auto loans, and food. Pay bills on time and make it a point to not have any balances, and instead have a portion of your income allocated for emergency funds. 
  • Consider getting co-signed loans. If you are able to get a loan with a co-signer, this means that you have a relative willing to pay for you should you miss any future payments. Co-signers shall be legally required to cover for the balance of the principal loan maker. However, be careful when applying for a loan as you may face a high-interest rate that can potentially send you back to a debt spiral.
  • Open a checking account. Some have loan applications rejected after a creditor sees a record of declaring bankruptcy, or missed payments in your credit history. An option for rejected borrowers is to get a checking account and request the bank for a secured line of credit. Doing so makes it more likely to get approval since you are already a client.
  • Look for credit unions. These are non-profit groups that might give you new credit lines, especially when you can prove that it will be profitable to the lender and that you have the capacity to repay what you borrowed. 

If you’re interested to know more about how to build credit after a bankruptcy petition, contact Phoenix Fresh Start Bankruptcy Attorneys. One of our Arizona bankruptcy attorneys will be able to address your financial concerns and help you obtain a fresh start. Contact our lawyers at 602-598-5075 for a free consultation.