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Credit report, credit score and loan after bankruptcy

Credit report, credit score and loan after bankruptcy

A discharge can damage your credit report. After bankruptcy, negative items can remain for up to ten years when you’ve filed for chapter 7 and seven years under chapter 13. This makes it more difficult to qualify for loans, mortgages, credit cards and car finance.

Don’t despair as your credit history isn’t set in stone and there are steps that can be taken to increase your credit score more quickly. This not only leads to credit approval, it will also help to reduce the cost of borrowing money in the future.

Improve Credit After Bankruptcy Discharge by Checking for Errors

We all expect that the information held by credit reference agencies to be flawless, but this simply isn’t the case. About 70 percent of credit reports contain serious errors that might cause consumers to be denied credit cards, car loans and even mortgages.

The Fair and Accurate Credit Transactions Act gives American citizens the right to a completely free credit report every 12 months from Experian, Equifax and TransUnion. If you’re looking to rebuild credit after bankruptcy, you should scrutinize the data held by each credit reference agency.

All agencies hold completely unique data and use their own variation of the credit formula devised by the Fair Isaac corporation. If there are any mistakes, such as a debt included in your bankruptcy agreement that continues to show as active, you’ll need to advise each agency individually.

The onus is on you to take steps to repair your credit report after bankruptcy several months before you apply for credit. Financial institutions are unable to ascertain whether the information is wrong as most credit searches are now fully automated.

Ways to Increase Your Credit Score or Credit Rating After Bankruptcy

It may not be the quickest way, but the most effective method of credit repair after bankruptcy is paying your debts on-time. In order to boost your credit score, you’ll need to make payments towards a form of both revolving (credit and store cards) and installment (loans and mortgages) debt.

When you’ve filed chapter 7, the chances are that you’ve included most of your unsecured debts in the agreement. If this is the case, there’s no need to worry as you can still qualify for a bad credit unsecured credit card or a secured credit card with a higher limit.

Once you’ve signed up, it is important that you avoid maxing out your new card. Most experts agree that you should avoid using more than 30% of the allocated limit in a single month. Keep this figure to below 10% to improve your credit after bankruptcy discharge.

Effective Credit Repair for Loan after Bankruptcy

Fixing your credit report after bankruptcy will help to increase your credit score far more quickly. You may be surprised to discover that you can qualify for credit now, but the cost of borrowing will be very high. After two years of timely repayments, you should be able to get approval for lower interest credit facilities.