Take bankruptcy as a motivational matter; it isn’t a barrier to success. After getting freedom from debts, you get a great chance to re-establish your credit score. And all your financial burdens pull out. But it doesn’t mean you will never experience adverse outcomes of bankruptcy. MyFICO says your FICO scores will vary after bankruptcy, for example.
- Good credit score before bankruptcy – FICO scores will decrease substantially.
- Average credit score before bankruptcy – the score reduction will be less severe.
- In other conditions – your scores may vary around 300 to 850 scale.
A Chapter 7 bankruptcy gives you a clean and debt-free financial status to a great extent. It also affects your credit score for seven to ten years because all bankrupt accounts stay on your credit report. You can’t get another loan because of financial instability as well. However the weight of such problems reduces over time with on-time debt return and careful use of credit.
You can re-establish your credit score by implementing various intelligent strategies. Let’s have a look at a few of them.
Offset the Bankruptcy Effect in 12 Months
The US credit system discounts penalties as it is pretty forgiving. It is an excellent chance to offset the affected credit within 12 to 18 months. It can only happen when your credit score is 550 or lower after bankruptcy.
You can’t get a good credit score until the bankruptcy is removed from your credit report. But at least this strategy can improve your credit score.
Show Bankrupt Accounts with Zero Balance
Keep all bankrupt accounts with zero balance for a good credit score. Show this balance of accounts, including Chapter 7 bankruptcy, on your credit report.
If these accounts still have credit, the score will remain lower than its original amount. Regularly update your bankruptcy accounts and credit reports. It will not let any error exist regarding credit display. Also, an error-free credit report will increase your credit score.
Send your credit report to the Consumer Financial Protection Bureau without paying a single penny. You can discuss any incorrect information on your credit report with them. They also adjust your error-free scores when you update your credit report.
Get Leverage from Reaffirmed Debts
You have an opportunity if you are still a debtor, even after bankruptcy. You use it to re-establish a good credit score. Use your current credit card rather than purchasing a new one. Pay all your bills on time. It will recover your payment history, the most vital credit scoring factor. So, it would be best to thank those debts or due dates.
The careful use of credit will help you in achieving good credit scores. The evidence of high-level responsibility will boost this achievement. However, chapter 7 bankruptcy will stay on your credit report for 7-10 years.
Keep a Secured Credit Card
If you don’t have an active loan or credit card, no problem. You can get good credit scores by applying for or having a secured credit card. You can keep the one whether you have a bankruptcy notation or extremely low credit scores.
You must deposit cash for a secured credit card safety that you will purchase. The amount of deposit cash is typically like the credit line. For example, if you deposit $500, your credit card limit will be the exact cost.
Mostly, creditors return the deposited money. It happens when you pay all credit bills on time. Then, your credit card will turn into an unsecured card. While a few creditors offer rewards so you can make the same money you will charge.
Fill Your Credit Profile with Alternative Data
Add alternative data to your credit reports, such as utility and mobile phone bills. It will increase your credit score. Also, fill your Experian credit report with this data by freeing the Experian Boost program of the credit bureau. There will be no terms and conditions for approval. Only you will need to pay all bills on time. According to Experian Reports, this program increases your bad credit range to 64%, a fair credit score.
Final Words
You don’t need to worry about bad credit scores after bankruptcy. For tremendous credit scoring strides, you need to focus on the following:
- On-time debt and bill payments
- Careful use of credit
- The level of time and efforts
Don’t call bankruptcy a barrier to success; it is a motivational push to increase your credit score.
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