Rebuilding credit after bankruptcy
Surprisingly, filing personal bankruptcy, while not a great help, is not a catastrophic injury to a
credit score. In fact, the New York Federal Reserve Bank published a study years ago that
found that within a year of completing bankruptcy, most bankruptcy filers were in a better
financial position, with a better credit score, than those who started out in a similar position but
elected to not file bankruptcy. There are very few lenders that will never lend to a borrower
because at some point in the past the borrower declared personal bankruptcy. Depending on
how late and what the payment is for, filing bankruptcy can be less damaging than late
payments on a significant debt, like a mortgage. Late payments also stay on your credit report,
affecting your score, for several years.
If you do file for bankruptcy, when your case is over, you should check your credit reports and
make sure that all of your debts that were covered by the bankruptcy are either not being
reported or show a balance due of $0. If they show a balance due, you should contact a lawyer
immediately to get that corrected.
After bankruptcy, the best product, and easiest to get , will be a credit card. Simply make sure
you pay on time for a year and you will see your score rise. After 2 years, except in unusual
circumstances, you will be eligible for a mortgage under favorable rates and terms, which is
usually a sign that your credit score has fully recovered, or even improved, from your
The best method to rebuild a credit score is to pay bills on time, carry a small balance, and wait.
Credit is like skin, time heals it and eventually, if they are cared for, scars become noticeable or
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