How to Build Your Credit Score after Bankruptcy?


Once you declare bankruptcy it affects your finances to the core and also your credit score.  Though your credit score decreases remarkably after bankruptcy, it can be recouped or improved practically and get back on track. But before trying to improve your credit score you need to understand the importance of it and how it affects your financial future.

Suppose you apply for any type of credit like credit card, loan, or mortgage, student loans or rental agreements, whatever the lender first checks your credit history. This is done to ensure if you can repay or not and based on that he decides whether to lend you or not and how much to lend. For this, they check your credit scores given by CIBIL and if your score is over 700 then you stand a chance of getting the credit you want.

Ways to improve your credit score:

First, you need to understand what happens if you declare bankruptcy. It can credit report that will hamper your credit score and will remain low until you rebuild your credit. Following are the steps to be taken to raise your credit scores:

  1. Credit report to be reviewed: The first and foremost step is to get a copy of your credit report from any of the three credit bureaus every year, review and check for any errors or inconsistencies. With this, you will understand where your credit standing is and how it is broken down.
  2. Pay your bills on time: Paying bills on time will easily improve your credit score as 35 % of credit score is made of your payment history. So to ensure you pay your bills on time set up reminders on your calendar before the due date. Also, you can pay your bills by linking to your bank accounts automatically.
  1. Caution while applying for Credit: In case you don’t have a major credit card account open during bankruptcy then it is important that you have an account after bankruptcy is declared. Initially, you will have to start with a secured card by paying some security deposit to the issuer. From then on you need to clear your full bills promptly on time. There is no need to carry balances to build good credit on your credit card.
  1. Take a loan down the line: After a year or two of the bankruptcy, you can take a car loan or some other loan and buy a vehicle that you can afford and pay off easily. Initially, you may have a higher rate of interest to pay but slowly it gets lower once your credit score improves.
  1. Be careful of Credit Repair Services: There are many credit repair companies who will offer their services to help you improve your credit scores. However, beware of them because you need to check for their authenticity. This is because many companies are involved in scams and also they might be expensive. It is always advisable to rebuild your financial future yourself personally.
  1. You need to know the limits: Know your limits on your credit cards after reestablishing your credit. Always maintain your balances below the limit. In the beginning, you may have low limits because of your bankruptcy but then it is ok. Use your credit card smartly and pay the bills on time
  1. Don’t Close Accounts: Closing of your accounts causes more damage to your credit history as it reduces the amount of credit you have available to you which leads to poor credit score. It is always good to keep the credit lines open and doesn’t yield to temptations.

The important thing to note here is to be patient. Since bankruptcy did not happen in a night’s time, so also building your credit score takes time.

Updated: November 30, 2016 — 12:23 pm

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