Repairing Your Credit After Bankruptcy Part 1
by Jenna
After we declared bankruptcy, our credit was understandably in shambles. I searched all over the internet for tips and tricks that would help me rebuild my credit quickly but the fact is, it takes time to build a great credit score. It takes even more time if you are rebuilding after something as disastrous as a bankruptcy!
It can be done though, and my husband and I are about halfway through the process. Our bankruptcy was three years ago, and we have done everything we could each and every month to raise our scores back up. Here’s the shortlist of ways we raised our credit score after bankruptcy. As always, I love your questions! So if you have any, just drop me a note in the comments below, and I will be happy to answer them for you.
How we rebuilt our credit after bankruptcy:
1) We challenged items on our credit report - You can challenge both incorrect and correct items on your credit reports. I am well aware that it’s unethical to challenge correct items. Frankly, declaring bankruptcy was one of the most unethical things I’ve ever done, and I am certainly not losing sleep over the few correct items I was able to have removed from my own credit reports.
Everything about the bankruptcy was done to give my family a future, including the credit report challenges. If you are going to challenge items on your own credit report, you can read more about how to do that in our article “How To Dispute An Item On Your Credit Report” There is a step-by-step downloadable guide at the end that will walk you through the entire process.
2) We contacted any creditors that were still reporting open accounts, and gave them our bankruptcy information - We had a lot of open accounts because of our medical bills. Every time a collection company sold our debt, the new owner of the debt would list another delinquent account on our credit reports. So even though the person who owned the debt at the time of our bankruptcy was contacted, no one else was.
This meant we had to back-track our debts (using our credit reports) and contact the people who used to own the accounts too. Not everyone was cooperative, but in the end we did get most of the old medical accounts to show up as closed w/ bankruptcy rather than still open and delinquent.
3) We opened up two credit card accounts each - The sad fact is, you have to have and use credit in order to build your credit score. A lot of people come off of a bankruptcy and swear off credit cards forever. If this is what they must do do manage their finances, then more power to them! However, my husband and I recognized that restoring our credit was the only way we would ever own a home someday. So, we applied for, and got, two cards each.
Which credit cards did we use after bankruptcy?
- The Orchard Bank Secured MasterCard - I opened this account up by sending in $300 to HSBC bank. In return, I got a $300 credit limit, and the deposit that I left with them earns a small amount of interest. I will eventually get that deposit back when I upgrade the account.
My Orchard Bank card also has a very low interest rate compared to the other credit offers available to me. It’s only 9.99%. Now, I realize that most people out there with great credit will not think this is a good interest rate! But for someone fresh out of bankruptcy, it’s a dream come true. It also has no annual fees, and no application fees. I highly recommend this card in particular to anyone who is looking to rebuild their credit. It is far and away the best of the bunch. They do report to all three credit bureaus each month, and so far I have been very happy with them.
- The Rewards 660 Visa - Ok, so I’m really not sure why this is called a rewards card at all, because there are no rewards! It does have a few benefits though. The main reason I chose to open up this account is because I was afraid that my Orchard Bank card would report as a “secured card” to the credit bureaus. (Which it does not - I just didn’t know that at the time. It works like any normal credit account as far as the credit bureaus are concerned)
So, the terms on this card were not so sweet a deal at all! But darned if they aren’t still better than the First Premier Cards (That is a terrible company! Only work with them if you have NO other option, seriously)
The Rewards 660 Visa charged $250 to the card in fees, up front. They called me at work to verify my income, and the starting credit limit was $300. They only report to two of the three major credit bureaus (Equifax and Experian, but not TransUnion).
The one redeeming feature of this card in my opinion is that they give you an automatic credit limit increase of $75 every three months that you pay on time. They have been having website difficulties recently, and it has been hard to log on and see my account. Last time I looked though, it seemed like everything was back to normal.
All in all, if I had it to do over, I would just get two secured credit card accounts. I mean, with the secured cards, at least you get your money back at the end. With the unsecured credit cards for people with bad credit, you pay a ton of money in fees, and you never get it back.
Those are the first three steps we used to repair our credit after bankruptcy. I will cover the other steps in part two of this guide. If you have questions or comments about any of these techniques, please let me know. You can use the comments form below.
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Keep Reading:
- Can One Bad Account Ruin Your Credit Score?
- Credit Repair Tricks: Using CD’s and Personal Loans to Raise Your Credit Score
- Understanding The Statute Of Limitations
October 9th, 2008 at 5:21 am
Just wondering how long after your discharge that you applied for the secured credit card. Thanks much.
October 9th, 2008 at 1:13 pm
Hi Anh,
We waited about six months, but that was mostly because we didn’t have the cash to spare to open the accounts up. You can apply for a secured credit card any time after your bankruptcy has been discharged. Since you’re basically guaranteeing the loan with your own money, most companies aren’t picky about the bankruptcy.
October 15th, 2008 at 1:02 pm
[...] Credit Card presents Repairing Your Credit After Bankruptcy Part 1 posted at Ask Mr Credit [...]
October 19th, 2008 at 2:45 am
I see not only are you a thief but a liar as well. How nice of you to “challenge” the correct items on your credit report!
Maybe that fact does not make you lose sleep at night, but how about all the people you screwed over by declaring bankruptcy?
And btw-we pay for our family’s health insurance each and every month outof our own pocket.
October 21st, 2008 at 1:19 pm
Due to a permanently disabling illness, I lost my job and had to file bankruptcy 2 years ago. I wish things were different. I have worked hard everyday of my life, until I got sick 4 years ago. I struggled for another 2 years to attempt to work, pay Dr’s bills and all the rest of my debt. I had no choice. Here it is, two years later and one of the Company’s hit my credit report with 4 dings, listing 4 charge offs? Can they do this? Will all the rest hit me too? my credit number was low as a result of the bankruptcy, now it’s hit rock bottom. For all of you that are unsympathetic to a person that could file bankruptcy, I will pray you never get sick.
October 24th, 2008 at 1:47 pm
I don’t see how declaring bankruptcy makes you a THIEF. If it were, it would be ILLEGAL to file. I can see how some people may see it as the “easy way out” and such, but being able to file bankruptcy is there FOR A REASON and you shouldn’t be made to feel guilty because you end up in a situation where it is in your best interest to file. We filed Chap 7 over 3 years ago because of medical bills that got out of hand (and we are uninsured) when I had problems with kindey stones and had to have surgery for that as well as having my appendix removed. We are like most of those families that fall through the cracks where that kind of situation is concerned………we make too much money to qualify for any kind of medical assistance but not enough to be able to buy health insurance. We were sinking in a sea of debt and this was the only way to keep from drowning. Yes, I realize there are people out there who use bankrupcty to their advantage and/or they kept getting credit cards and taking out loans KNOWING they were going to file bankruptcy….but there actually are people out there who are not trying to scam by working the system to thier advantage for devious reasons. It is the same with food stamps, welfare and other programs like that as well. The majority of people on it have no business using it, but amongst all those people perfectly capable of taking care of themselves if they would get off their lazy butts, there are actually a few people that these programs were set up for that legitimately need them and it is the same with bankrupcty. There are actually people out there who need this assistance and should not be made to feel like scum or a theif because they use it.
October 24th, 2008 at 6:14 pm
Jenna, thanks so much for sharing your experience with the intent of helping others. You are not a thief, and obviously have a much kinder heart than some other people… whose opinions really don’t count for much.
People who truly have it together try to help and uplift others where they can. People who are a mess act out and attempt to tear others down, like what we saw above. At the end of the day, you know what kind of a person you are.
You should be proud of yourself for doing what you need to do to take care of yourself. Sometimes, life deals you nothing but lousy options. If comments like the one above ever get you down, please remind yourself that businesses do this all the time. When bankruptcy happens in the business world, it’s called a “business decision.” What some people think is “immoral” in the personal sphere becomes just another daily occurence in the business sphere… Never mind that bankruptcy in business is often a product of irresponsible leaders overextending a company so they can ‘get theirs’ before the bankrupt company… does what? Buys out the true thieves’ contracts to get rid of them. Now really — who’s immoral here?
As far as the “people [anyone] screw[s] over” (see Susan’s comment, above) by declaring bankruptcy… Why do we think medical care costs so much? Everyone who can and does pay their bill is paying enough to pay for the care they received as well as make up for other people who aren’t able to pay. Why do we think credit card companies charge usurious interest rates and use sneaky bait-and-switch tactics? They have number-crunchers giving them detailed statistics on how much bad debt they have likely extended, so they know how much extra to charge everyone else to make up for that. At the end of the day, these people still make a profit. *Everyone* is making “business decisions” here. Don’t feel bad about yours.
October 24th, 2008 at 9:00 pm
Thank you all so much for your kind and understanding comments, they matter more than you know, and they made me smile.
December 3rd, 2008 at 11:57 am
Just to comment about anyone who hasn’t been in this situation and that has enough money to buy there own medical insurance. You can’t really understand the hell people go through to struggle and pay there bills and try to feed there family. In today’s economy there just nothing left over after buying gas and food for your family..
January 6th, 2009 at 3:48 am
Susan, you have obviously never had serious health problems or have fallen on bad luck, lost a long term job to you company moving overseas or just plain been screwed by the economy. I think you need to stick your feet in someone else’s shoes for a real life lesson.