Ways to Improve a Credit Score During Bankruptcy

A bankruptcy, depending upon which type you file, can stay on your credit report for up to 10 years. During this time, mortgage, auto and personal lenders will be able to see that you once filed for bankruptcy protection. This makes you a riskier borrower in their eyes. It also lowers your three-digit credit score, the number that lenders rely on to determine whom to lend money and at what interest rates. The good news is that you can immediately take steps to improve your credit score after filing bankruptcy.

Choose The Less Severe Bankruptcy

Individuals can choose from two types of personal bankruptcy: Chapter 7 and Chapter 13. Choosing the least severe of the two will have less of an impact on your credit score. Filing for Chapter 7 wipes out your debts, while filing for Chapter 13 sets up a repayment plan that allows you to pay off your debts at a pace that works for you. Both negatively affect your credit score, but Chapter 7 is more damaging. The impact on an individual's credit score depends on a variety of factors, including how high his score was before filing for bankruptcy. Chapter 13 bankruptcy also stays on your credit report for a shorter period of time. This type of bankruptcy will remain a part of your credit history for seven years, while Chapter 7 remains on your report for 10.

New Habits

You can immediately being improving your credit score during a bankruptcy by becoming a more responsible consumer. This means that you start a new history of paying all your bills on time, each and every month, and that you never again run up large amounts of revolving debt. This is the surest way to boost a credit score back to the range that lenders prefer: above 720. It won't happen overnight, but paying your bills on time will steadily boost a credit score.

Get Credit Again

It may seem counter intuitive, but it's important for individuals to begin a new credit history as soon as they can once they've declared bankruptcy. That's because consumers need to show lenders that they've learned from their mistakes and are now able to use credit cards wisely. Consumers won't be able to qualify for the credit cards with the best rates and benefits after filing for bankruptcy. But it's OK to start small with less attractive cards. The key is to get a card and then to use it properly, meaning that you only charge what you can afford to pay off each month. If you do this for a long enough period of time, you'll gradually rebuild your credit score.