Credit After Bankruptcy
Proper Post-Bankruptcy Credit Reporting:One of the great myths about bankruptcy is that it erases bad credit history. It doesn't. Declaring bankruptcy frees you from liability for the debt you owed at the time of the filing. The status of credit accounts should be updated to reflect that these debts have been "discharged in bankruptcy" and that the balance currently due is $0. Improperly characterized old credit accounts weigh down your credit score. I recommend waiting six months after a bankruptcy discharge before pulling your credit report. You are entitled to one free credit report each year from each of the main credit bureaus: Equifax, Experian and TransUnion. You can access your free credit report through www.annualcreditreport.com or by calling 1-877-322-8228 and going through a verification process over the phone. Note: Your bankruptcy does not discharge debt that arose AFTER the filing of your case. Bankruptcy buys you a fresh start, but does not apply to debt incurred after the case was filed.
How Long Will a Bankruptcy Show on Credit Report?Chapter 13 bankruptcy remains on your credit history for seven years; a Chapter 7 is reported for 10 years. Credit accounts may be deleted at different times depending on their status prior to being included in bankruptcy. For example, an account that was current when you declared bankruptcy will remain on file seven years from the date it was included in bankruptcy. An account in collection when you declared bankruptcy still will be deleted seven years from the original delinquency date that led to the charge off, so it may be deleted before the bankruptcy is.
How Can I Establish Good Credit After Bankruptcy?The way to establish good credit after bankruptcy is (unfortunately) to get new lines of credit and use them! If you are successful in establishing an account, and use it responsibly for a year or two, you will begin to build - once again - a good credit history.
WHAT TO DO? One way is to find a co-signer. Ask a relative or friend with good credit to co-sign your credit application. A co-signer promises to pay if you don't. However, if you don't make payments on time, the co-signer will be responsible for the loan. By failing to pay, you could damage your relative's or friend's credit. Over time, you will get better card offers. I have rarely seen the decent unsecured credit card offer to a client who has recently filed a bankruptcy. Don't be fooled by clever marketing. Most of the many credit offers you will receive should be treated like the plague! Try to resist the temptation to apply for these bad credit cards.