After A Bankruptcy Discharge: Improving One’s Credit History

Written by James Hirby and Fact Checked by The Law Dictionary Staff  

Setting the Stage:  The aftermath of a Chapter 7 discharge on a debtor’s respective credit scores is that a debtor will see a 100 to 200 point drop in each of the “big 3” credit score bureaus.  To get the actual bottom line (poor pun) on this, the experts and people with experience say to wait sixty to ninety days after the discharge papers are delivered to get a report from the credit score bureaus for the “after discharge” credit scores.  The debtor can expect to pay about $15 for each report and the experts say that the debtor should get all three.  Each of the credit reporting bureaus calculate credit scores differently so it is necessary to learn how each one views the debtor’s score.  The debtor’s scores will likely be above 400 and below 600, as a norm.  Yes, certainly, every person’s outcome will be different.  Also, realize that the pre-discharge credit scores would have already been relatively low for the many late payments over many creditors being reported.

Improving one’s credit score is as much avoiding actions that decrease or degrade one’s score as much as doing those actions that will increase one’s scores.

Most experts and experienced non-experts had time ranges of 60 to 120 days that a credit score starts to increase within 90 days after the latest late payment or bad news, like a bankruptcy, is posted on the score card.  To increase one’s credit score, some say that one must have some outstanding credit balances, but many others disagreed.  Someone coming out of bankruptcy is likely better off having no outstanding balances on anything if at all possible.  Other points for increasing one’s credit score is having no late payments in the last ninety days, paying all existing bills, credit cards, utilities, and book clubs, whatever on time.  Many people said that they experience a time lag of up to 15 business days from the day a bill is snail mailed to the date that the payment is posted.  The minimum that one can expect is about 10 business days.  Many recommended trying to mail out the bill and payment within one week of the bill arriving at one’s residence.  Those companies receiving payments and who contribute to the credit score card process can take up to sixty days to report its payment dates, late or on-time, on the debtor.

One reason for wanting to get the credit report from each of the major reporting bureaus is to track one’s improvement on each as one pays each bill.  The debtor needs to gauge the impact of various bills on each report.  When the debtor decides to get a credit card, several people who went through this suggested some cards specifically because that card report to at least two of the major reporting bureaus if not all three.   One wants all three if one can make that happen.   Recommendations included getting low limits, buying on credit each month and paying the balance off each month.   Have only one card for at least six months, better to wait for a year, and then get a second card with a better deal because one’s scores are better.  Make small steps.  Be sure of what debt one can handle.  Prioritize paying everything off each month over getting more debt.

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