Building a Credit Score After Bankruptcy

A bankruptcy is a federal court proceeding where the assets of a debtor are liquidated and the debtor is relieved of further liability. It is listed on your credit report and is perceived as a negative to prospective lenders. According to Fair Isaac, inventors of the FICO credit-scoring model, FICO scores range from 300 up to 850. A bankruptcy can lower your score by as much as 365 points. Repairing your score will require the reestablishment of your credit.

Instructions

1

Order your credit score. You can do this at the websites of the three major bureaus, Experian, Equifax or TransUnion, or at www.myfico.com. This will give you a starting point to measure your progress over time.

2

Apply for a secured credit card from a major bank. The amount of your initial deposit will determine your credit line, and you will not be able to charge above the amount of your deposit. Banks usually upgrade secured credit cards to unsecured within 12 to 18 months and then return your deposit to you, including interest.

3

Charge a small amount on your new, unsecured card, but keep the balance low. How much debt you carry accounts for 30 percent of your FICO score. Going over the credit limit on a credit card will lower your score.

4

Pay bills on time and in full each month. Thirty-five percent of your FICO score measures how well you pay your bills. On-time payments will gradually raise your score, since FICO gives more weight to recent activity. Late payments will ruin any progress you're trying to make.

5

Order a new copy of your credit report one month after your first payment is made. The Fair and Accurate Credit Transaction Act (FACTA) gives you the right to order one free credit report each year from Equifax, Experian and TransUnion. You can order reports by mail, phone or online at the bureau's website.

6

Check the "accounts section" on your report to ascertain if the bank reported your new account correctly. Look at the credit limit, balance and payment status. Also, verify that all accounts included in the bankruptcy are listed as such.

7

Dispute any inaccurate information with the credit bureau. Errors may lower your score. The FCRA requires that only accurate information appear on a credit report and gives you the right to dispute erroneous data. You can file a dispute online at the bureau's website, by mail or phone.

8

Apply for a second secured card six months after opening the first one. This will enhance your credit score since 10 percent of your FICO score reflects new credit; however, don't apply for more than one card at a time. Fifteen percent of your FICO score measures the length of a credit history. Each new account shortens that history and, thus, can lower your score.

9

Continue to manage both cards well by keeping balances low and making on-time payments. In a year, check your credit score again to measure your progress and track improvement.