Can I Improve My Credit Score After Bankruptcy?

Living in Miami is expensive. One of the reasons some people use for not filing bankruptcy is that the bankruptcy will ruin their credit forever. This is a bankruptcy myth. Your bankruptcy filing may result in a temporary decrease in your credit score; however, you can improve your credit score with time and dedication. In some cases, filing bankruptcy helps you clean up your credit and begin repairing damage by getting rid of old debts. The first step is to understand how your credit score is calculated.

How is My Credit Score Calculated After Bankruptcy?

The credit bureaus calculate your credit score after bankruptcy using the same criteria they did before you filed your Chapter 7 or Chapter 13 bankruptcy petition. The most widely used credit score is the FICO Score 8. To calculate this score, five categories are used. The information in each category is compiled from your credit history. Therefore, your score changes as your credit history changes, which allows you to improve credit scores after bankruptcy.

A FICO credit score is calculated as follows:

35% is based on payment history;
30% is based on the amounts you owe on credit accounts;
15% of the score is based on length of credit history;
10% is based on new credit; and,
10% of the score is based on the mix of credit on your credit report.

As you can see, the majority of your credit score is based on your payment history and the amount of debt you owe. For this reason, delinquent payments and maxing out each credit account can quickly lower a credit score.

Because many debtors come into bankruptcy with maxed out credit cards and numerous past due payments, their credit score has already dropped. However, there is good news. You can improve credit scores after bankruptcy. In many cases, filing for bankruptcy relief can help you improve your credit score quicker than ignoring your debt problem.

Tips to Improve Credit Scores After Bankruptcy

First, you need to obtain copies of all three credit reports after you receive your discharge and your case is closed. If you have not ordered a copy of your credit reports within the last 12 months, you can receive free copies from Annual Credit Report. The government requires that the three major credit reporting agencies provide free copies of the reports to individuals who request the reports once every 12 months.

You need to review each of the reports for errors. If a debt was discharged in bankruptcy, the account should have a zero balance on the report. The creditor should not continue to report payments as delinquent for discharged debts (old payments before the discharge will remain on your report).

If you find errors on the credit report, notify the credit reporting agency and the creditor in writing. Monitor the account until it is corrected. Continue to obtain copies of your credit reports every 12 months to review the reports for errors.

Other tips for improving credit scores after bankruptcy include:

Make all future payments on time. Delinquent payments can cause your score to fall quickly.
When you are ready, consider a secured credit card. You must place a deposit with the company, but the secured credit card can help you re-establish credit.
If an account with a zero balance was not closed, do not close it. Older accounts help increase your score. If possible, begin using the account, but pay the balance in full each month.
As you begin using credit again, try to have a mix of credit. Never open accounts and use credit that you cannot easily afford to pay off if necessary.

For more information and tips for improving credit scores, visit the Federal Trade Commission’s website.

Try to be patient. It will take time to improve your credit rating after bankruptcy; however, it will happen. In many cases, individuals see an improvement within a year after the case is closed.

Contact a Miami Lakes Bankruptcy Lawyer for More Information

If you want more information, call Adams Law, P.A. at (305) 615-2905 or use the contact form on our website to schedule your free consultation with a Florida bankruptcy attorney. Our law firm serves clients in Miami Lakes, Coral Gables, Hollywood, West Palm Beach and throughout South Florida.