A bankruptcy credit score can be terrible, however, not as bad as many people imagine. Many people imagine bankruptcy will ruin their credit score past the ability to recover and that’s not true. While it will have a negative impact initially, you can recover easily.
Often times your credit score is bad enough that your bankruptcy credit score may actually be improved. By the time you’ve made the difficult decision to apply for bankruptcy you’ve already accumulated a negative score due to non-payments and late payments and collection accounts.
In the long term a bankruptcy may very well help your credit score. Fair Isaac is the company that uses the FICO formula to decide your credit score. They grade your credit compared with that of other people in a similar position as you are. So Fair Isaac divides people into 10 groups using score cards and then ranks each individual into each group based on their peers. These score cards are not numerical score cards, but a classification. One classification is “bankruptcy filers”. Therefore, your score is determined by comparison to other people in your same position as opposed to comparing you to those in a much better or much worse position. Fair Isaac reports this as a much a better risk indicator.
While you will not be able to bring your credit score up to the highest, best score while it appears on your credit report, it is possible to bring your bankruptcy credit score as high as the second best score in the seven hundreds. With seven hundred twenty being the score reported to net you the best interest rate, that’s no small feat.
There are a few ways to immediately start raising your bankruptcy credit score. Being immediately by getting an updated credit report and checking to see that all accounts included in the bankruptcy filing are correctly listed as “filed in chapter 7 (or chapter 13) bankruptcy”. If those accounts are still listed as delinquent payments, immediately write the agency to have it reflect its new standing.
Your next step would be to file for new credit cards. You may not be able to get an unsecured one just yet, but go ahead and get a secure one. This is a good way to begin rebuilding your credit score. It’s not unlikely to be able to get an unsecured credit card within 2 years of filing bankruptcy provided your history shows better behavior since you filed it.
If you have a friend or relative with whom you share a lot of trust you can ask them to put you as an account user on their credit card. Your filing will not affect their credit score, but that account history will automatically go into your credit report.
You may have to wait a couple of years to mortgage a home, but you can finance a car within a few months by financing through the dealership. Make all your payments on time and this will be a very useful tool for bouncing back your credit score.
Bankruptcy is not a desirable option, but it doesn’t have to be scary. If you maintain good financial responsibility as well as take steps to rebuild your credit you can easily achieve a good post-bankruptcy credit score.