Salvaging Your Credit After Bankruptcy
In many ways, we've each become a number. Credit scores are used not
only by lenders, but by landlords, insurers and even employers to gauge
financial health and trustworthiness. Bankruptcy can have a debilitating
effect on a credit score, which can trickle down to negatively affect
many areas of life.
Luckily, there is
life after bankruptcy. Bankruptcy is not the end of the financial road and damaged credit scores
can be revived. However, improving a credit score after bankruptcy requires
due diligence, patience and self-control.
Steps Up the Financial Ladder
The first step in improving your credit score is to review your credit
report. The score is derived from information on the report. A credit-reporting
agency is charged with updating the information, but errors are common
and can have a devastating impact.
The next step is to ensure that your credit report correctly reflects the
status of all your debts. Many
credit card debts are discharged during the bankruptcy process; however, if the discharge
does not appear in the report, it could look like you continually failed
to make payments. Similarly, review your credit report to ensure that
paid debts show a "closed" status.
Finally, make sure no one else's debts are on your credit report. It
is not uncommon for the debts of a person with a similar name, birth date
or address to appear on the wrong credit report. Social Security numbers
are not always used to match debt to people and the reporting agencies
are not known for their accuracy.
Frequently reviewing a credit report can also help you spot fraud and identity
theft. Someone may have applied for credit in your name, which can significantly
affect your credit score. Thankfully, reporting agencies are required
to correct inaccurate information in a credit report when it is discovered.
Using Credit to Improve Credit
Building a positive credit history after
bankruptcy is essential if you wish to increase your credit score. The best way to
build history is with a secured credit card. A secured card requires a
deposit into an account and the limit on the card matches the deposit
amount. Paying the amount due each month will slowly build a positive
Paying all other bills on time and in full is crucial. Missing a payment
can significantly impact an already-damaged credit score. Once bills are
under control, a small and manageable loan, with full and timely payments,
can demonstrate financial control and trustworthiness.
You should continue to check your credit report to ensure paid debts are
being removed and no other inaccuracies are cheating you out of a better
credit score. The process will be long and will require discipline, but
the end result of a higher credit score will open financial doors that
make it all worth it.
To learn more about bankruptcy and credit reports, speak with an experienced
bankruptcy attorney near you.