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 credit history.
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.