Shocking Results: Credit Scores Drop the First Year After Bankruptcy

A couple of years after filing for bankruptcy, many people find their credit scores are worse than the day the bankruptcy was approved. I was shocked when I saw that. According to LendingTree, most people see a boost of about 69 points when they file, but their scores typically drop back down by 29 points within a year.           

The good news is, your credit score will improve if you follow these tips.                                                                                                                                                                                     

Here’s How to Rebuild Your Credit

As soon as the bankrupycy is discharged, you’ll be able to get approved for credit cards, with a very small limit. Get one. Start charging one tank of gas a month and pay it in full.  After maybe six months, you’ll start getting approved for higher limit cards; get maybe three or four of those. Charge a tank of gas on each once a month, and pay them all in full.

If you get offers to raise the limits on your cards, go for it! But don’t charge more. You want to increase your limits, but don’t increase your charging; stick to the one-tank-of-gas rule.   

(Some people talk about credit builder loans, where you deposit money and borrow against it, but I’m not sure that’s any better than charging gas. Our big local credit unions, PenFed and Apple, don’t offer those loans.)

Why Credit Scores Might Drop Again                             

There are a couple of mistakes that can cause scores to drop after bankruptcy.                 

First, some folks avoid credit cards altogether, but it’s essential to keep building your credit history. You don’t want bankruptcy to be the most recent thing on your credit report. (Making timely car payments doesn’t usually help your score much.)    

Second, some people max out their new cards. Your credit utilization—how much of your available credit you use—matters a lot. If you’re close to your limit, your score will drop.     

Keep to my simple strategy: Charge one tank of gas on each card each month and pay it off in full.   

For Some People, Life Keeps HappeningWhy Credit Scores Might Drop Again                             

Some people do everything they should do to rebuild their credit. then bam! Life knocks them down again. If could be a be a medical problem or another lost job. Then they are looking at possibly getting garnished. If that happens to you, please get in touch with me again.                                                                                                                         

For More Info                                                                           

For more info, see my blog on Five Websites to Check After Your Discharge. 

PS Please Give Me A Review.  If this article is helpful, please give me a review.