Recovering from Bankruptcy: Easy Ways to Start Rebuilding Your Credit
Going bankrupt is not something anyone aims for but, the fact remains, in certain situations filing for bankruptcy can be the most sensible way to get a viable repayment plan in place (not to mention some protection from your creditors.)
More and more people who have serious debts but, nevertheless, command a steady income, are managing to use bankruptcy as a method for paying back money they owe over a period of 5 years or so, all without having their assets liquidated. This is because Chapter 13 bankruptcy allows you to hold on to possessions such as your house, whilst giving you time to repay your debts through your normal income.
Whilst this is great news for people running out of options and worried about losing everything, the protection the bankruptcy gives you comes at a price. Filing for bankruptcy is something that will effect your credit file for a number of years. It is not, however, an obstacle that cannot be surmounted. There are some surprisingly simple steps you can take to help you recover as quickly as possible once you receive your discharge papers.
Ensure Your Credit File is Correct
Though it sounds bizarre going bankrupt should, in some ways, clean up your credit file. This is because all of your past debts should all appear on your credit file under your bankruptcy. This makes all those different debts seems like one entity.
However, credit bureaus rarely update files after a discharge notice is given. This means it may be down to you to make sure all those old debts are listed on your credit file as âincluded in BK.â This will let financial institutions see that you have paid off your debts.
For this reason you should be sure to keep hold of your discharge papers as proof that the debt has been paid. If you have this proof simply send it, along with a dispute letter, to the credit bureau. They will make changes within âa reasonable amount of timeâ, which is commonly taken to mean 30 days.
You can have information changed significantly quicker than this by using a ârapid rescore' method. To do this you'd have to apply for some form of credit. If the bank found a problem on your file that you wished to dispute, as long as you could provide some form of proof from the creditor that you no longer owed them (such as a release of lien notice, a satisfaction of judgment, a bankruptcy discharge or a letter for deletion of collection account) the incorrect information can be changed within 48 hours.
Use Someone Else's Credit File to Boost Your Own
This is an incredibly easy and not very well known way to boost your credit score. It works by essentially linking your credit file with that of somebody with a much better credit history. The simplest way to do this would be for them to add you as a âcardholderâ on their credit card (this can easily be done with a call to the card supplier.)
Having done this the card, along with it's flawless repayment history, will appear on your credit file, giving it a real boost. This effect is increased the older the card is as, the longer the repayment history, the more reliable the picture it paints.
However, this linking is two way. Therefore you'll have to have a very close bond with the person in question as they run the risk of spoiling their credit file by having you added to it. There is an easy way to put them at ease though. All you need for your credit history to improve is to be down as a âcardholderâ, you don't actually have to use it. You may be able to put other person's mind at ease by explaining that you do not actually need access to the card or even to know the pin number!
So, by simply ensuring the credit bureaus know about your discharge notice and getting linked to a friends credit file, you can seriously improve the look of your credit history without out actually running the risk of managing any new credit or responding to the plethora of offers you'll receive trying to entice you into getting a loan or credit card.
Steve Waller has a wealth of experience in the world of personal finance and regularly
adds advice and information on his blog to help people who are unsure of their options.