Repair Your Credit After Bankruptcy

10 Tips to Repair Your Credit after Bankruptcy

Facing up to severe debt problems can be difficult and feel overwhelming. Although at times it may feel like you will never recover, with patience and perseverance, you can rebuild your credit. Follow these simple principles to begin rebuilding your credit score after your bankruptcy has been discharged or you have completed your insolvency arrangement, whatever form it has taken.

Number 1. During the period of your bankruptcy or other scheme, ensure you follow the terms of the agreement or order. If you are having difficulties, speak to your advisor about it immediately. Avoiding the facts will only cause more difficulties in the future: the sooner you face up to the problem, the easier it will be to resolve it.

Number 2. Keep up payments on any debts or credit obligations that are not covered by your bankruptcy or other scheme. If you have any other debts that were not included in your arrangement, ensure you keep up regular payments on these accounts. If you have any difficulties with these accounts, make sure you speak to your advisor about it as soon as possible so they can help you take appropriate action.

Number 3. Keep track of your monthly income and outgoings on a budget planner. Whichever type of arrangement you have opted for, it’s likely you will have had to produce a detailed monthly budget to follow as part of the planning process. Make sure you keep track of your monthly income and outgoings on a budget planner in the future, even after the end of your bankruptcy or other scheme. This will help you to keep a watchful eye on your finances, and may help you spot warnings signs in time to deal with them before they become dangerous.

Number 4. Do not apply for any credit during the period of your bankruptcy or other insolvency arrangement. Wait at least six months after you have been discharged from your bankruptcy or other insolvency arrangement. You are very unlikely to be accepted for credit during this period and the application will leave a footprint on your credit file, further damaging your rating.

Number 5. Check your credit reference file. Make sure the facts on your file are correct. Remember, the record of your bankruptcy, IVA, DRO or administration order will remain on your file for six years, so be sure to amend any errors or inaccuracies. If you wish, you can add a note to your file to explain the circumstances that led to your financial issues originally.

Number 6. Apply for credit — responsibly. It might surprise you to learn that one of the best ways to rebuild your credit rating after being discharged from bankruptcy is to start to use credit again — within sensible limits.

Number 7. Time it right. It can be a good idea to wait around six months after you have completed your bankruptcy, or other arrangement, before considering making any credit applications. After six months, consider applying for a credit card from a specialist credit card provider. A specialist provider is much more likely to approve your application than a mainstream one, so it makes sense not to waste time, or leave damaging footprints on your credit reference file, by applying for mainstream credit cards you are unlikely to be approved for. If your application is not approved, wait at least two months before applying again.

Each application leaves a footprint on your credit file and making multiple applications may give the appearance that you are desperate for credit. As a person with a history of debt problems, you need to avoid giving this kind of impression.

Number 8. Provide full, accurate information. When applying, be sure to provide full, accurate information. Bankruptcy, IVAs, DROs and administration orders are all matters of public record and will appear on your credit reference file. The credit card provider will be able to see this information on your credit file and will make their decision based on your individual circumstances and their own lending criteria. But if you omit information or provide untrue answers in your application, you will certainly not be approved for credit.

Number 9. Use your new credit sensibly and sparingly. Once you have been approved, use your credit card sensibly and responsibly: Do use it to make purchases, but be sure to stay within your credit limit. Pay your credit card bills on time, every time. By using credit sensibly, keeping within your credit limit and paying your bills on time you will begin to show evidence that you can manage your credit obligations responsibly. Over time, this evidence builds up on your credit file.

Number 10. It won’t happen overnight, but don’t panic: be patient and eventually your history of bad credit will be balanced by, and eventually outweighed and replaced by, your more recent history of responsible credit management. It’s unlikely that the circumstances that led to your bankruptcy or other debt problems happened overnight, and it takes longer to rebuild bad credit than it did to develop it in the first place. But it is possible to rebuild your credit rating. If you are a discharged bankrupt or have completed another form of insolvency arrangement, some credit providers like Vanquis or Omniloan may be able to help.