When you incur more debt that you can’t afford to pay, bankruptcy is sometimes the only option. However, although bankruptcy can help you get out of debt, it won’t help your credit score. In fact, bankruptcy can drop your score by 150 points or even more. After you have filed for bankruptcy, you will need to raise your credit score before you will be able to qualify for credit cards, mortgages, car loans and other types of credit. If you are wondering how to increase your credit score after bankruptcy, follow the tips below.
1. Make sure your credit report is accurate.
Having a bankruptcy listed on your credit report will cause your score to drop dramatically, but other factors can still have an effect. After filing for bankruptcy, request a free copy of your credit report and scan it for errors or inaccuracies. If you notice any problems, file a written dispute with the credit reporting agencies.
2. Apply for a secured credit card.
Getting credit after bankruptcy is hard, but it isn’t impossible. Even with the bankruptcy on your record, you may be able to qualify for a secured credit card with your local bank. In order to obtain a secured credit card, you must typically make a small deposit into a bank account. In exchange, the bank will provide a credit card with a credit limit equal to a portion of the bank account’s balance. To increase your credit score, use the card responsibly and make all of your payments on time.
3. Consider purchasing tradelines.
Purchasing tradelines involves adding seasoned credit accounts to your credit history by becoming an authorized user on another consumer’s accounts. The positive information associated with these accounts will factor into your credit score calculations, and your score will typically increase. Depending on the specifics of your credit history and the tradelines you purchase, your score may increase mildly or dramatically.
4. Apply for small credit cards.
Once you have increased your score a bit, consider implying for some smaller credit cards, such as those offered by retail stores. These cards are often easier to qualify for than standard credit cards, and they will still have a positive effect on your credit score if you use them responsibly.
5. Don’t take on too much at once.
Although applying for new accounts will help you increase your credit score after bankruptcy, you shouldn’t try to apply for too many accounts at once. Not only will you run the risk of taking on more debt than you can afford, but each application will also result in a hard inquiry on your credit report.
6. Watch out for predatory lending.
If you have a recent bankruptcy on your record, you are more likely to be contacted or targeted by predatory lenders. Predatory lenders are creditors who offer loans with inflated fees or incredibly high interest rates. Common examples of predatory lending include payday loans, tax refund advances and loans that are much too high for the borrower to repay based on his or her income and other obligations.