A question I am often asked by people who have had a previous bankruptcy is how to minimize the effect on their credit report & scores. I have seen many clients who have been able to get their scores up to over 640 within 12-24 months of a bankruptcy being discharged, and others whose scores continue to stay in the low 500 range even several years after their bankruptcy.
A bankruptcy on your credit report has a very negative impact on your credit score. Those who had a clean credit report before the bankruptcy will likely see the most impact, sometimes by upwards of a 100-point drop. If you already had several negative items on your credit report, the drop in your scores will not be as substantial. A bankruptcy can remain on your credit report for up to ten years. Here are some tips to lessen the blow of a bankruptcy:
1) Make sure your creditors are accurately reporting the bankruptcy. If an account was not part of the bankruptcy, it should be reported as such. All accounts that were part of the bankruptcy should show a zero balance and included in the bankruptcy.
2) After seven years, or ten years in some states, your bankruptcy should be removed from your credit file. Check your credit reports and be sure it has been removed.
3) After your bankruptcy is dismissed, begin rebuilding your credit AS SOON AS POSSIBLE by demostrating good payment habits on a secured credit card. The number one thing a potential new lender/creditor is looking for is how you have handled your finances since your bankruptcy. If you have even 1 or 2 late payments it will reflect that you have not gotten your finances back in order and represents a higher risk to a new lender. During the first 12-24 months after bankruptcy establishing some new accounts and maintaining a perfect payment history is essential to helping your credit recover from your bankruptcy.
If you need a helping hand feel free to call my office for a complementary credit & debt review at 1-888-456-5635.
Your Credit & Debt Expert