Credit Score After Bankruptcy Discharge
Bankruptcy can affect your credit score, by how much or for how long depends on your previous credit history. This article outlines what happens to your credit score after bankruptcy discharge and how to improve it.
What Happens To Your Credit Score After Bankruptcy Discharge?
Filing for bankruptcy lowers you credit score to about 200 points or more. This will gradually improve with time and regular payment plans. The credit score after bankruptcy discharge will end up to be cleared of all debts and late payments when it’s finalized. This will increase your credit score to some extent, though it will take time.
It can be difficult to recover from bankruptcy but using the opportunity to develop your credit history and ensuring no new debts have built up will help your credit score improve. If you follow a steady financial plan, the bankruptcy will be dropped from your credit score.
Increasing Your Credit Score After Bankruptcy Discharge
- The first step is to open a charge account. This type of account has a higher interest rate but will increase your credit score. Most retail shops are willing to award credit if you own a charge account.
- Apply for a secured credit card account as this will require you to deposit money in the account. Make sure the company will change the account from a status of secured to unsecured once a period of time has passed. This is easily done if timely payments are made.
- Paying any bills on time or installments can improve the credit score after bankruptcy discharge. This shows how well you handle financial targets and will look good in the eyes of potential lenders.
- When paying for a purchase put a substantial amount as down payment. This will help remove the remaining amount quicker as well as reduce interest that needs to be paid. In turn this can increase the credit score.
- Keep up to date with your credit report quarterly. You are eligible for a copy annually from three major credit bureaus and this will help you identify any errors. Any wrong entries can be reported to the credit bureau.
- Learn to budget. The reason you ended up in bankruptcy was because you were not careful before. Spending carefully and sticking to a decent budget will help you improve the credit score after bankruptcy.