Once you file for bankruptcy, you may believe that it will be years before you are eligible for another loan. This is because the process negatively affects your credit score. After bankruptcy, it is common to experience difficulty opening charge accounts or purchasing items on credit. In addition, you may face heightened interest rates on loans. Fortunately, there are ways to help improve your credit score in as little as one year after liquidation.
Before you begin the process, make sure that the accounts that were associated with the bankruptcy hearing are documented as such. Furthermore, these accounts should show a balance of $0 if you filed Chapter 7 bankruptcy. If a creditor reports the account as delinquent after the liquidation process, your credit score will suffer. Once you square away your status, you can work toward raising your credit score.
First, it may help to open a charge account at a furniture or appliance store (or any retailer with big-ticket items). These stores are the first to grant credit after bankruptcy. It takes more time to be approved for credit by a standard credit card company. While an appliance or furniture store account may have a high interest rate, you have to start developing credit somewhere.
To boost your score, you should make a purchase from the store, putting down at least 50 percent of the item's cost. This significant down payment will minimize the interest that you pay on the account. With a majority of the cost put down, you will also have the ability to pay off the outstanding balance relatively quickly.
Next, you can open a secured credit card account. This type of account requires you to secure your charge account by depositing money into a bank account. It is best if you chose a company that will allow your secured account to transform into unsecured status with time. The interest rate is higher for an unsecured account; however, this type of credit arrangement will help raise your credit score.
The best way to improve your score is to make timely payments. This includes payments for new accounts and the payments for any assets you kept within the bankruptcy process, such as your home mortgage or car loan. If you handle your finances with care, you will be more appealing to prospective future lenders. Opening and paying off additional accounts will increase your credit score.
Finally, it is important to monitor your credit report. This can help you catch any flawed information. You can obtain a free annual copy of your credit report from each of the three major credit bureaus. If you spot an issue, report it to the credit bureau immediately.
If you file for bankruptcy, your life is not over. Think of the process as a new beginning. If you have questions about bankruptcy or your credit, you should contact a qualified bankruptcy law attorney today.