Credit Repair after Bankruptcy

Credit repair after bankruptcy is a subject our professionals are often asked about. Usually we start by explaining what happens with credit rating in a bankruptcy, what the effects of a bankruptcy on your credit rating are, and then what you can do to improve your credit report following a bankruptcy.

Effect of bankruptcy on your credit rating

How does bankruptcy affect your credit rating? - If it is your first bankruptcy, you will have a credit rating of "R9" (which is the lowest rating) for a period of six years following your discharge from the bankruptcy. For a second bankruptcy, your rating will be "R9" for fourteen years following your discharge.

However, regardless of bankruptcy and credit rating, it is still possible to obtain credit following a bankruptcy discharge. This is due to the fact that lenders generally each have their own set of rules for assessing individual credit applications. Some lenders may place more or less emphasis on such factors as credit rating, current income, family and employment situation, cosigners, and various other lending criteria.

Improving your credit rating after bankruptcy

There are several ways to improve your credit rating or credit score following a bankruptcy:

• Firstly, you should check your credit bureau report following your discharge from bankruptcy to ensure that all debts included in the bankruptcy are shown this way on the report.
• Contact your banker and say that you would like to re-establish your credit rating.
• Open a savings account and begin to put aside a portion of your monthly earnings such as 5 to 10% of your net pay.
• Take out a small loan using the savings account as collateral, and then pay it back.
• Continue paying a secured loan or mortgage after bankruptcy. If you are able to keep paying on a car lease or house mortgage after bankruptcy this will help you with credit repair after bankruptcy discharge.
• Consider being added as a borrower under an existing car lease or secured loan of a spouse or family member.
• Apply for a secured credit card. A secured credit card is a quick way to rebuild your credit rating. For example, Horizon Plus reports your payment history to the credit bureaus each month. As you make regular payments your credit history improves.
• Always pay your bills on time. Although the payment of your utility bills, such as phone, cable and electricity, is not recorded in your credit report, some cell phone companies may report late payments to the credit-reporting agencies, which could affect your score.
• Reduce the number of credit applications you make. If too many potential lenders ask about your credit in a short period of time, this may have a negative effect on your score. However, your score does not change when you ask for information about your own credit report.

If your credit score is not as high as you think it should be, firstly make sure that the information in your credit report is correct. If it is correct, read your report carefully to find out which factors are most likely having a negative influence on your score, and then work to improve them.

For more information and for further tips on improving your credit rating and, more specifically, credit repair after bankruptcy you can also visit Financial Consumer Agency of Canada (FCAC).