Ways to Improve Your Credit Score After Filing for Bankruptcy

One of the main concerns bankruptcy filers may have when filing for bankruptcy is how much damage it will do to their credit rating. Credit scores affect whether people qualify for loans and the interest rates on those loans, so they impact if people can make major purchases like homes or cars.

An experienced Indiana bankruptcy attorney will tell you that filing for bankruptcy does not mean your credit score will be irreparably damaged. There are a number of ways to improve your credit score after filing.

Make sure your credit report is error-free

If you filed for Chapter 7, make sure all the accounts that were included in your bankruptcy show $0 balances, and are not being reported as delinquent. Also review your report for other mistakes and clerical errors.

Build up credit

If you don't qualify for a regular, unsecured credit card, start with a secured card. The issuer of a secured card will require you to make a deposit in the amount of your credit limit. Often after 12-18 months of timely payments on a secured card you will qualify for an unsecured credit card.

Another way to build credit is to ask a close friend or family member to allow you to be an authorized user on one or more of their credit cards. This will create an account history on your own credit report.

Use credit cards responsibly

Just having a credit card won't significantly improve your credit score; you need to use it. Keep the account active by making frequent small purchases and paying off balances right away. Don't go overboard and run up a huge balance. Large purchases on credit cards will show you have less credit available. Ideally, use under 10 percent of your available credit.

Ask for a credit line increase

After you have a record of on-time payments consider asking for an increase of your credit card limit. A higher limit will improve your credit utilization ratio, thereby improving your credit score.

If you take the right steps, your credit score will only improve after filing for bankruptcy. Sometimes you may qualify for a car loan within a few months, and after a couple of years mortgage lenders may be willing to work with you if you want to purchase a home.