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.
If you don’t want to miss Part Two of “Rebuilding your credit after bankruptcy“, you can click here to subscribe to our RSS feed. It’s free, and you can unsubscribe any time you want to.
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 05:21
Just wondering how long after your discharge that you applied for the secured credit card. Thanks much.
October 9th, 2008 at 13:13
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 13:02
[...] Credit Card presents Repairing Your Credit After Bankruptcy Part 1 posted at Ask Mr Credit [...]
October 19th, 2008 at 02:45
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 13:19
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 13:47
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 18:14
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 21:00
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
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 03:48
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.
January 22nd, 2009 at 19:39
Jenna,
I just wanted to thank you for having this information availble for me to read
We our going to get are discharge in about a month I hope
we been in the bankruptcy for over 14 month and just want it to be over
did know where to start and then I foind this site
So THANK YOU THANK YOU
January 22nd, 2009 at 21:05
Congratulations on your discharge Jodie!
Best of luck as you begin repairing your credit. It’s easier than you think it can just be a little costly in the beginning.
February 16th, 2009 at 04:33
I opened an unsecured at ORchard Bank less than 6 months after discharge credit limit $750 – Very easy approval.
February 17th, 2009 at 01:30
Hello all,
Thank you for the information and posts. Guess what? I, too, have been debilitatingly ill for over 3 years and have spend over $50,000 on my credit cards to get well. I saw over 27 doctors and finally was diagnosed 3 months ago with chronic advaced Lyme disease. It has been HELL to say the least…I have never been so sick in my whole life.
Because my doctors were unable to come up with an accurate diagnosis in a reasonable amount of time my Lyme spread to my brain and CNS. I was so desperate for relief I spent so much money trying alternative therapies since the medical system here really failed me.
I am on the path to recovery now with major medical expenses still, but I am researching declaring bankruptcy because I cannot handle the minimum payments on $50,000 ($1400/month), pay for my current and future treatments (this is going to be a long battle) and I am only making 60% of my salary on disability.
I have already negotiated down my interest rates but still cannot afford the monthly payments. I guess the good news is that I don’t have a car or house to be repossesed but I would like to be able to buy a car and house someday…I have no husband or family to help me and this is really hard.
My heart goes out to all the other people who have chronic debilitating illness and major expenses because of it. Talk about feeling screwed!
If anyone knows of a reputable debt settlement company, please let me know. Most want to charge me $7500 plus a monthly fee to help me talk down the total amount of debt owed back to 40%, but they don’t even pay the creditors, they just have the creditee put money in an account and pay it themselves…I want to be very cautious.
Prayers to all of you.
Beth
February 26th, 2009 at 06:01
Welcome to the game, Short and sweet . Laid off ,searched for a job a month straight , Asked mortages car, credit card people to reduce interest rates , lower car note and lower interst rates on credit cards , Met with NO, NO not at all .After I brgged pleaded cried and applied for my unemployment which was not enought to satisfy anybody ,lost house car and living with a relative untill I get back on board for a short while, I know soneof you out there has not gone through this to this extent , But if and when you do . It will be a bumpy ride , All bills pd on time every month and when I could not get back up on my feet quickly, Thrown to wolves Chapter seven , no more regrets
March 30th, 2009 at 17:34
I too had to take out bankruptcy after my husband passed away unexpeceditaly 4years ago. I was so embarresed by this, as we had always paid our bills on time.I also thought it was wise to get rid of all my credit cards and pay only cash for my needs. Not the greatest idea. Now I would like to refinance my home but I found out I have no credit score. I was encouraged to get a credit card and use it wisely. I applied for a WalMart card, since I shop there regulary. Guess what? They turned me down because of the bankruptcy. Any way I’m going to try a secured card and hope that works.
So all you people that have been there, good luck to you. Those of you that think bankruptcy is not the way to go, I hope you never have to find out, as most credit card companies only care about the bottom line. Too bad we all don’t work for AIG!
April 14th, 2009 at 23:25
I have read all of your responses and my heart goes out to each of you (except Susan). The bottom line: Things happen that are beyond our control. When that happens the only option you have is to survive so I don’t blame any of you for your decision. I want to give you all some advice. There are several places that will give you credit, but use it wisely. I filed bankruptcy 4/30/08 discharged 8/27/08 (will never forget that day). Recently got the nerve to apply for a credit card in April was approved through Capital One. I spent $11 and paid it off before I got my first statement (4/11/09). Target is also known to be bankruptcy friendly but if you are not a target shopper I wouldn’t get one. Anyway my advice is be patient and things will come to you.
April 23rd, 2009 at 14:31
[...] Repairing Your Credit After Bankruptcy Part 1 [...]
August 5th, 2009 at 09:14
I thinks its a shame that people teach other people to lie and cheat. Although Bankruptcy isn’t a crime, you still have to accept responsibility for it and change your behavior (the root of the problem). Lieing to remove a debt you owe, is sweeping dirt under the carpet. Also, its a horrible idea to go and get credit cards again! You did not do your homework. A secured card will prevent you from going into debt and it does wonders for your credit. The best thing you can do is to never be late on any of your bills. You need a 1 yrs good payment history…Contact Consumer Credit Counseling services for help. Use the information. Never lie or cheat anyone. FYI: that is what the rip off credit repair companies do and are being fined and shut down because it is illegal. You reap what you sew
August 13th, 2009 at 14:43
I have sat here and read the responses above and I honestly can’t believe the way people talk to other people. You don’t know their situations or what they’ve been through. And who gives you the right to judge what they HAVE to do?
My husband and I have just started the proceedings for filing bankruptcy and there is NOTHING easy about it. It’s not an easy way out! We have owned our own business for the last seven years and until this economy went south we were doing great. We could afford everything that we have. We took our kids on nice vacations, paid for college; we had the “Great American Dream”. We are now losing it all…house, cars, business, etc. It’s not easy. We have no other choice at this stage of the game.
I’m not going to be ashamed, embarrassed or harassed by people like you because we are in this situation. We weren’t out borrowing and spending money that we didn’t have, we were working hard trying to provide a good life for our family. We have tried to keep from filing bankruptcy and all we’ve done is prolonged the inevitable.
Before you judge you should walk in my shoes!
September 14th, 2009 at 03:41
Well…I have never been sick, unemployed or loose a business..im just one of those people who was young and dumb that made bad decisions in the past not realizing the consequences and NOW I have things i want to do that I cant. I would like a fresh start since i have done my homework and more responsible with my life. I have just started my chptr 7 in the process of getting my paperwork together, so your advice i will take with me and thanks for the insight….thank u…and goodluck fellow bankruptcipions.
September 24th, 2009 at 13:12
Susan, try to learn compassion and understanding for others. Being judgemental is not a healthy way to live. As many have said – walk a mile in someone else’s shoes before you utter one word about their situation. Obviously, you have NO idea what it’s like to fall on hard times and not be able to to pull yourself out. Again, as others have said there is nothing easy about this. It’s a humiliating experience and one not undertaken lightly.
Jenna, thank you so very much for taking the time to help others – it always amazes me the volume of information online and how many people put effort in to do this, when they are getting little to no return – just pure generosity. Thank you again.
January 16th, 2010 at 20:43
There are a lot of people who fall on hard times, and not by choice. I too, was in that situation. I had gotten divorced, and was left with all the bills. I had a job at the time that paid for everything. Then, the unexpected happened, I got laid off. I couldnt survive being a single parent on unemployment with all those bills. I ate up all my savings to try to avoid bankruptcy. I ended up getting another job, only to be paid less than half of what I was making before. I had NO CHOICE but to declare bankruptcy. I was drowning in debt and I had a little girl to worry about. Sometimes you gotta do things in life you are not proud of, but must do whatever it takes in order to survive. I am credit card and debt free now and living within my means. I sleep better at night and have no more stress and worry in my life wondering where I was going to get all the money to pay my bills. Its not a fun situation to be in..so before you criticize someone for something…think of how you would handle it if it happened to YOU.
January 18th, 2010 at 00:31
Any advise on if Lexington Law is worth using to help?
Thanks