A bankruptcy will stay on your credit report for ten years. However, if you demonstrate responsible credit habits immediately after the bankruptcy, you will greatly improve the odds of getting the credit access you need at affordable rates. A bankruptcy is certainly a negative item and it will affect your credit report but it becomes less important over time particularly if you can prove you now have good credit habits
A quick and effective way to put a positive mark on your report is to obtain a personal loan from your bank. Obviously no banker is going to grant a loan on your signature immediately after a bankruptcy. There is however, a win win scenario but it requires that you explain your situation.
As soon after the bankruptcy as you can accumulate $1,000, go visit the bank where your checking account is. Explain to the loan officer that you are trying to start rebuilding your credit and you would like to do this through a personal loan. Further explain that you would like to purchase a $1,000 six month CD from the bank and pledge that as collateral for the loan.
So now the banker is faced with an application for a six month $1,000 personal loan secured by his bank’s own CD for $1,000. By granting the loan the bank sells a CD and earns interest off the loan itself. It is an easy decision for the bank.
Use the $1000 from the loan to open a savings account and use that to pay back the loan. Your credit report will almost immediately show the bank loan which by itself is a good thing. Using the savings account, pay back the loan on time each month for the term of the loan. Now you have a new account with timely payments and all it has cost is the interest on the loan.
If your cash flow allows, you may want to repeat this process once the loan is paid back. Also ask your loan officer about a secured credit card. If the bank offers that service, read the terms and conditions carefully to insure you understand the fees and limitations of the card. Make sure they report it to the credit reporting agencies as a standard credit card rather than a secured card.
A bankruptcy is a big blot on a credit record but it can be overcome. FICO scores are predictive. It looks at current behavior as well as the past record and projects the risk in the future. If you demonstrate that you are behaving responsibly, your score will improve.