If you've been through bankruptcy recently, it's pretty likely your credit scores have suffered a bit. If your plan is to buy a home or refinance in the future, it's important to begin working on rebuilding your credit right away so your scores recover sooner. Though much of the damage to your credit will "heal" on its own as time passes, it's still important to do what you can to help things along. The faster your credit recovers, the easier it will be to qualify for a great mortgage down the road.
The following are a few simple things you can do to help rebuild your credit faster after a bankruptcy:
1) Check your credit on a regular basis and fix any issues promptly. Federal law entitles you to a free copy of your report once per year from AnnualCreditReport.com, but it's always a good idea to check it on a more regular basis. If you find an error, contact the credit bureau reporting the error and get it cleared up as soon as possible. Contact information for all three major reporting agencies can be found online or in the report itself.
2) Clear up open derogatory accounts. Even if all your debt was wiped out in the bankruptcy, it's not unusual to see old accounts being reported as collections or charge offs long after the discharge date. These don't necessarily go away on their own, so it's important to do what you can to clear them up so they don't cause any issues when you want to apply for a loan in the future. If you do owe on a collection account, you may be able to negotiate a reduced payoff with the collection agency, just be sure to get any agreement in writing before you put a check in the mail.
3) Get all payments in on time without fail. This might seem like an obvious tip, but it's worth a mention because it's very important. Lenders will want to see that you've reestablished your credit with a good payment history, and if you've missed even a single payment, it could make it tough to qualify for a mortgage.
4) Keep credit card accounts below 30% of the limit. With a bankruptcy pulling down your scores, it's important to make sure everything else on your credit is as good as you can make it. If your balances are nearing the limits, it could make you look "maxed out" and damage your scores. Keep your balances below 30% of the limits even if you pay your cards in full every month.
5) Don't close older accounts. The reporting agencies like to see long credit histories, so if you happen to have an old account you don't use a whole lot still open, don't be quick to close it. Closing old accounts can shorten your credit history and damage your scores.
6) Get a secured credit card. If you've gone through bankruptcy, it's a good bet lenders won't be eager to lend to you for a while. One way to help reestablish a good payment history is to get a secured credit card. Many banks will offer you a new account as long as you're willing to secure it by depositing some money in the bank.
Hopefully these tips are helpful! As I mentioned, time is the primary "healer" of credit damage after a bankruptcy, but you can help things along by taking some of the steps I've listed here. The sooner your credit recovers, the easier it will be to get a great mortgage deal.
The following are a few simple things you can do to help rebuild your credit faster after a bankruptcy:
1) Check your credit on a regular basis and fix any issues promptly. Federal law entitles you to a free copy of your report once per year from AnnualCreditReport.com, but it's always a good idea to check it on a more regular basis. If you find an error, contact the credit bureau reporting the error and get it cleared up as soon as possible. Contact information for all three major reporting agencies can be found online or in the report itself.
2) Clear up open derogatory accounts. Even if all your debt was wiped out in the bankruptcy, it's not unusual to see old accounts being reported as collections or charge offs long after the discharge date. These don't necessarily go away on their own, so it's important to do what you can to clear them up so they don't cause any issues when you want to apply for a loan in the future. If you do owe on a collection account, you may be able to negotiate a reduced payoff with the collection agency, just be sure to get any agreement in writing before you put a check in the mail.
3) Get all payments in on time without fail. This might seem like an obvious tip, but it's worth a mention because it's very important. Lenders will want to see that you've reestablished your credit with a good payment history, and if you've missed even a single payment, it could make it tough to qualify for a mortgage.
4) Keep credit card accounts below 30% of the limit. With a bankruptcy pulling down your scores, it's important to make sure everything else on your credit is as good as you can make it. If your balances are nearing the limits, it could make you look "maxed out" and damage your scores. Keep your balances below 30% of the limits even if you pay your cards in full every month.
5) Don't close older accounts. The reporting agencies like to see long credit histories, so if you happen to have an old account you don't use a whole lot still open, don't be quick to close it. Closing old accounts can shorten your credit history and damage your scores.
6) Get a secured credit card. If you've gone through bankruptcy, it's a good bet lenders won't be eager to lend to you for a while. One way to help reestablish a good payment history is to get a secured credit card. Many banks will offer you a new account as long as you're willing to secure it by depositing some money in the bank.
Hopefully these tips are helpful! As I mentioned, time is the primary "healer" of credit damage after a bankruptcy, but you can help things along by taking some of the steps I've listed here. The sooner your credit recovers, the easier it will be to get a great mortgage deal.
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Can I purchase a home after bankruptcy? Find out when you can qualify for a mortgage after a bankruptcy.
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