Obtaining a Good Credit Rating after Bankruptcy

One worry that many people have when they contemplate bankruptcy is the effect it will have on their credit rating. However, if one has reached the point of considering filing for bankruptcy they either have already or soon will have a falling credit rating. What many do not realize is that the effects of bankruptcy do not last as long as it stays on a credit report.

When FICO scores are calculated the individual is compared not to the general public but instead to other consumers who have also filed for bankruptcy. This means that by demonstrating responsible behavior people, who have gone thru either Chapter 7 or Chapter 13 bankruptcy, fairly quickly build their credit rating back up. The following tips will speed the process.

1. Check your old creditors to be sure they do not still have you listed as owing them. If you find there are amounts listed for those accounts and they were included in the bankruptcy contact the creditor and have it corrected.

2. Establish a good payment history by paying all bills on time. This is very important because this shows that you have put your financial difficulties behind you and are on solid financial footing.

3. Acquire a new credit card. It may be necessary to start with a secured credit card. Works like a debt card or gift card in that you pay the money first and then use the card lowering its value with each purchase. For those without enough cash to obtain a secured credit card, if a friend or relative will add your name to their card, then without even using the card your credit history will be positively affected.

4. Once you qualify for an unsecured credit card (about 18 months) only obtain one and pay it off every month. Not carrying a balance will show that you are not slipping back into bad habits.

5. If the accounts you had discharged remain open with a zero balance do not close them but instead let them sit empty. Removing them will lower your credit score while having them sitting without any balance is good for your credit rating.

6. Continue to monitor your credit reports, and if you feel you can make a good case, send a statement to each credit bureau explaining why your bankruptcy happened and how you are now in a stronger financial situation.

It is important to remember that the credit industry isn’t interested in judging or punishing you. They are only interested in how big a credit risk you represent. They know that sometimes people have bad things happen to them and they get in over their heads. They also know that some people are simply perpetually irresponsible. Once you show them that you belong to the first group you will find your credit score rising quickly.