Improving Credit Score After Bankruptcy
One of the most damaging items to have on your credit report is a bankruptcy. But when it comes to credit improvement, bankruptcy gives you a fresh start, making it easier for you to gain control of your finances and effectively rebuild your credit.
How Does Bankruptcy Work?
When you’re granted a bankruptcy, it is essential instant debt relief from all debts included, meaning that you’re no longer obligated to pay. You are, in a manner of speaking, debt-free. But having your debt obligations discharged makes little difference to your credit report. There you’ll find every negative item that was there before the discharge. It’s your job to contact each and every creditor and/or collection agency to inform them that your credit report is inaccurate. Sound familiar? That’s right; it’s time to start sending dispute letters.
Fixing Your Credit Report
Mailing dispute letters to the credit bureau is probably the best way to have your credit report corrected - and a common tactic used by most credit repair companies. A dispute letter’s purpose is to inform the credit bureaus that your credit report is inaccurate and that you’d like it fixed. This usually results in the accounts on your credit report changing to a “covered under bankruptcy” status, but may sometimes result in a complete removal of the item.
Raising Your Credit Score
Be aware that in addition to the damage caused by your bankruptcy, your credit score will take a small hit for each and every item that remains on your report. This, of course, includes the discharged items covered under your bankruptcy—even if they’re reporting accurately.
If you cannot have these items removed during the dispute process, you will have to offset these damaging items by adding new lines of credit. Many people think that a bankruptcy will make it difficult to gain credit approval, but to the contrary, many lenders are eager to extend credit to post-bankruptcy consumers.
That’s because you’re now debt-free (as a result of the bankruptcy) and (should) have more disposable income to apply toward new debt. So if you’re serious about using bankruptcy to your advantage, cast aside any doubts you have about credit cards and start using them as a tool to rebuild your credit. By having the proper number of cards, managing your spending, and making all your payments on time, you’ll see a sure rise in your credit score in just a matter of months.
Bankruptcy Can Work For You
Although bankruptcy is a last resort solution to credit problems, it does carry its share of benefits: It not only relieves you of overwhelming debt, but it can make fixing your credit report and building new credit much easier. If you stay the course and follow the rules, you can finally have what you’ve always wanted: good credit.
