Life After Bankruptcy- Rebuilding your Credit

The economic tsunami devastated your portfolio of investments and you were pushed into seeking bankruptcy protection. The credit score you were so proud of plunged from the low 800’s or high 700’s down to its current level in the 500/600 range. You’ve got a fresh start but at what cost? Don’t give up just yet – things may be looking up faster than you think.

Keep in mind that with your debt reduced, your credit score may actually have increased. Part of the credit scoring formula includes a factor for the amount of debt you have. Thanks to the bankruptcy, the amount that used to count against you has likely been substantially reduced. In some cases this may add as much as 100 points to the low point of your score.

This reduction in debt gives you an opportunity to carefully acquire credit in reasonable portions (like by using a prepaid credit card) that will help to build your credit profile. It’s not uncommon to receive lots (that’s LOTS) of credit card offers after your bankruptcy is discharged. Make a careful selection and it will help to improve the payment history portion of your score.

Another important consideration is that the actual negative impact of filing bankruptcy has been lessened. It’s a matter of percentages. Lenders make money when they lend. In a good economy, the majority have good credit. But in a bad economy, credit scores are lower and so called “derogatory” events are common. As a result, the waiting period after a bankruptcy before most lenders will consider extending credit has been decreased to two years with a credit score of 620. That’s a dramatic change from prior years.

So your credit may be better than you thought, and recover faster than you thought as well. Manage any new credit carefully, keep balances low and pay any remaining debt obligations on time and you’ll be surprised how quickly you’re back into positive credit score range.

By: Evan A. Nielsen (Licensed in California)

Schedule your free bankruptcy consultation today by calling (480) 888-7111 or submitting a web request here.