If you've recently filed chapter 7, performing credit repair after bankruptcy should be considered an essential part of your financial recovery. The sooner you start, the more quickly you'll recover. Repairing your credit score after bankruptcy means that you won't have to wait 10 years to qualify for low interest mortgages, loans, credit cards and car financing.
Bankruptcy credit repair isn't something that can be achieved overnight, nor is it legally possible to get a new credit report, but you should be able to qualify for mainstream financial products in just 2 to 3 years. You need access to credit and to pay your debts punctually each month.
Using Secured Credit Cards for Credit Repair After Bankruptcy
The formula used by the Fair Isaac corporation is a closely-guarded secret, but it's clear that your score will be higher if you utilize different forms of credit. This means that you'll need multiple forms of revolving (credit and charge cards) and installment (loans, mortgages and car financing) debt.
Credit repair after bankruptcy is difficult if you don't have active credit card agreements. The chances are that you'll have filed chapter 7 to eliminate unsecured debt so won't have any credit cards or revolving debt to help with post bankruptcy credit repair.
Your credit rating after bankruptcy can be improved with a secured credit card. You'll need to provide collateral, such as property or a cash deposit, but you'll get a higher credit limit. You should use no more than 30% of this limit each month. When repairing your score, never max-out your card.
Using Unsecured Bad Credit Cards for Rebuilding Credit After Bankruptcy
Unsecured credit cards for poor credit work in a similar way to secured cards. The main differences are that you don't have to provide collateral and your limit will be lower. You will normally find that your limit is just $250, although this can be reviewed after a period of 6 months.
The low limit can make it difficult to keep your credit utilization figure below 30%. You'll also tend to find that there are more up-front charges and fees that need to be cleared before you start to use your card. However, if you pay punctually, lenders will report this to credit reference agencies on a monthly basis.
Help Correcting Credit Report Errors for an Improved Bankruptcy Credit Rating
If you've included a debt in your agreement, you need to make sure that this is reflected on your credit report. The last thing you want is a debt that you've eliminated that continues to show as active. This not only results in a lower credit score, it could also lead to a collection agency pursuing you for the balance.
You're legally entitled to a free credit report under the Fair and Accurate Credit Transactions Act from Equifax, Experian and TransUnion every 12 months. When repairing your credit history, you'll need to contact each credit reference agency as the information they hold is completely separate.
Although you'll need to provide the appropriate supporting information, never post them an original copy. You should send a photo copy of your bankruptcy agreement by registered mail. Credit repair after bankruptcy can be achieved personally or with the help of a credit attorney.
Sources
"Building a better credit report." Federal Trade Commission (FTC).
Asa Ghaffar - Asa has over 10 years of practical experience in loan approval, secured lending, bad credit repair, stock trading and debt management.
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