Do you declare a death sentence to your credit card score when you file for Chapter 13 or Chapter 7 bankruptcy? No, you do not! You can still rebuild your credit card score. Even though it may look like a daunting and impossible task, especially when you look at your credit card score after a bankruptcy filing, know that it is not impossible to restore it.
How Badly Does Bankruptcy Affect Your Credit Card Score?
Lenders and banks analyze a person’s credit card history to decide if they qualify for a loan and the type of interest rate they should set if they decide to provide them with one.
Here is an example on how bankruptcy plummets your credit card score:
If your credit card score was 780 before you filed for bankruptcy, after it, your credit card score will be between 540 and 550. If your credit card score was 670, it will be between 140 and 180 after bankruptcy filing. For lenders, a bad credit card history marked with bankruptcy is a red flag. Does that mean you will never be able to secure a loan?
You can take the following steps to fix your credit card history:
1. Examine Your Current Credit Card History
You can obtain access to free credit card reports from various sites. If you do not know what you are doing, you can visit an accountant or someone with the expertise of analyzing credit card history. You need to examine your credit card report for inaccuracies. If you find any, counter them and correct them.
2. Examine Your Credit Card Score
You can obtain access to your credit card scores from the internet. You should keep a record of your credit card score each month. Do not look at several types of scores to track, but look at the same credit card score each month. You need to know which type of score your lenders will look at when you apply for a loan, thus it is important to track your score and clean your credit card reports.
3. Provide Assurances to Lenders
Lenders will see you as a risk, a liability— a person they cannot trust to repay them in full. To assure them that you are not a risk and they should invest in you, you need to provide them with additional assurances. Here are a few ways you can use to assure your lenders about your ability to repay them:
Secure Loan– Credit card unions and community banks are two types of entities that can provide you with a secured loan.
- Deposit money, but cannot access it
- Loaned money is placed in a savings account and released once the required payments are made
Secure Credit Card– The deposit you pay backs up the card and limit is the amount you paid.
Co-signed Loan or Credit Card– Ask a family member or friend with a good credit card history to become your co-signer
Authorized User– Ask someone to make you an authorized user, but ensure the credit bureaus receive your payment activity
Do not give up hope! Rebuild your credit card history!Read More