So here you are, post bankruptcy with a terrible credit score. The thing that sucks is that regardless of why you filed bankruptcy or that you had excellent credit score prior to filing, a bankruptcy on your credit report is devastating.
Unfortunately the mathematical algorithm is used to calculate your credit score is not subjective and does not care that you always paid your bills on time or that your business went under because of the economy. You are thrown into the category of fiscally irresponsible anyway and must dutifully fight your way out.
Since the idea is to get back on your feet ASAP, the first item on your agenda post bankruptcy should be immediately immediately repair your credit score. Yes, the bankruptcy is on your credit report for up to ten years, however, that should not stop you from aggressively pursuing a better credit rating starting NOW!
Let's review quickly (because you can find this information anywhere on the web) just exactly what makes up your credit score in the first place.
- Your payment record . Pay on time = good. Pay late = bad.
- Length of credit history . The longer you have had a credit history the better.
- Amount you owe versus credit available . Low balances with high credit available = good. High balances with no credit available (maxed out) = bad.
- Kind of credit . Various types of credit (install, auto, mortgages, credit cards) = good. Few kinds of credit (only credit cards for example) = bad.
- Credit inquires . Rate shopping or shopping for a car are supposedly do not have a negative impact; shopping for a multiple credit cards may be a sign that you are financial distress.
Now most people of reasonable intelligence have a basic understanding of what makes up a good credit score. Pay your bills on time and do not max out your credit cards and lines of credit. But where should you start when trying to repair your credit from a devastating banking?
A good place to start is with item number three from the list above. Getting new credit can be tricky after you file, but it can be done. DO NOT GIVE UP. Search online for credit card companies that offer credit cards to people who have a bankruptcy on their record. Use the card regularly, make your payments on time, do not max it out and do not always pay it down to zero (leave $ 20 or so as a balance).
I was surprised to find (and be accepted for) a credit card through Orchard Bank that offered reasonable terms and no security deposit. Granted they only cave us $ 300 credit, but you have to start somewhere!
After a few months (being careful not to have too many credit inquires), apply for another card. Gas cards and in-store cards may also be easier to obtain post bankruptcy. Keep building your available credit while keeping your balances low.
Being careful not to only have credit cards as your only source of credit, you might want to explore adding another kind of loan into the mix. For example a small installment loan or auto loan with a co-signer would be a good place to start.
Start taking these small steps immediately; do not hesitate for one minute. Start rebuilding today and take advantage of the new start you have been given!