How to Improve Your Credit Score After a Chapter 7
Once you file for bankruptcy, the credit bureaus note your bankruptcy case on your credit report, which damages your credit score. According to The Fair Credit Reporting Act, a Chapter 7 bankruptcy will continue to appear within your credit file for up to 10 years.
Although you cannot have a legitimate bankruptcy petition removed from your credit record before the legal reporting period expires, you can improve your credit after the court discharges your Chapter 7 bankruptcy.
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Instructions
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Make timely payments on any debts you chose to reaffirm during your bankruptcy. Examples of reaffirmed debts are secured assets, such as a home or vehicle. Your payment history to your creditors accounts for 35 percent of your credit score, according to the U.S. Department of Commerce's Minority Business Development Agency. Because this is the most significant single factor influencing your score, ontime payments are vital to rebuilding your credit after Chapter 7.
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Apply for a secured credit card. Secured credit cards often require a cash deposit to pull from in case you fail to make payments. The benefit is that your damaged credit won't influence your approval.
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Charge no more than 10 percent to 30 percent of your spending limit to your new secured credit card. Carrying a higher balance affects your debt-utilization ratio, which is the amount of debt you carry compared to your credit limit. A high balance hurts your score.
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Make all of your credit card payments on time. Like your reaffirmed debts, your payments to your new credit card company contribute to improving your credit score as long as they arrive on time.
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Purchase your credit score after making timely payments to your creditors for six months. You can purchase your FICO scores directly from the Fair Isaac Corp. (see Resources section).
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Compare unsecured credit cards that you are interested in. Unsecured credit cards look better to lenders on a credit report than secured credit cards do, and if your credit score has improved, you might be eligible for these cards in as little as six months. Unsecured credit cards do not require a cash deposit.
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Call various unsecured credit card providers and inquire about their eligibility requirements. If your credit score is high enough to qualify, apply for an unsecured credit card.
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Tips & Warnings
Choose a secured credit card company that reports to all three credit bureaus. Not all secured credit card providers report to the credit bureaus. If your credit card company does not report your account and your payments, it cannot benefit your credit rating.
Negative entries impact your credit score less over time. Thus, by displaying good debt management habits, you can expect your credit score to naturally increase over time.
Choose a secured credit card provider carefully. Some charge high annual fees and require you to purchase features you might not want, such as credit insurance.
References
Resources
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