Bankruptcy Can Be Reported for 10 Years

You should know that most negative activity can remain on your report for 7 years, but bankruptcy can be reported for 10 years.  Don’t fall for potential scams that insist they can have it removed earlier.  These credit agencies are likely going the route of disputing the bankruptcy, claiming that the credit bureau needs to prove it.  Well, if you really did file bankruptcy, that’s all the proof that is needed.  It’s true that you can dispute information on your credit report, and that if the dispute is not responded to within 30 days, the bureau must remove it.  But if the information is true, no matter how negative, it will not be removed until the necessary time has passed.

Bankruptcy is Removed Automatically

There’s nothing you need to do in order to remove bankruptcy from your credit report.  It is automatically programmed to disappear after 10 years.  However, if you reach that point and notice that it is still being reported, then you can contact the bureau and file a dispute to have it removed, and you’ll be likely to win at this point.

Close Accounts Related to Your Bankruptcy

Some of the accounts that were related to your bankruptcy may still be reported, and you can (and should) file a dispute to remove them if you know they have been closed or otherwise resolved.  Especially once the bankruptcy has run its course, you want to remove any and all other evidence of it.  Your credit score depends upon a positive history, and as long as you’ve improved your financial habits since filing bankruptcy, your score can go back up again.  But letting those old accounts remain on your credit report is only pulling you down, so be sure to get rid of them.

Bankruptcy is an extremely negative option for resolving debt, but unfortunately, sometimes it becomes the only way out.  It will take time, but remember that it is possible to come out of this event on the positive side.  Make sure you pay your bills on time and, when possible, in full.  Don’t push the edge of your credit limits (especially since you’re probably paying very high interest rates for the time being).  Make a conscious effort to fix your habits, and you’ll fix your credit score, slowly but surely.

The best thing you can do is make all your payments on time.  If you can pay your balances in full, that’s even better, but at minimum, be on time regardless of how much you can afford right now.  When you’ve just opened your first line of credit, your score may be high because you don’t have any negative history.  But you also don’t have any positive history, so smaller mistakes like late payments can cause your score to drop rather quickly, and you want to be careful not to start heading down the negative path right out of the gate.

Keep your balances low.  You might be pretty excited if you’ve qualified for a high credit limit, but remember, it’s not free money.  You’ll be expected to pay back every penny at the end of the month, and if you don’t, you’ll be slapped with interest payments.  Rack up enough of those and your debt could rise almost exponentially.  If possible, only spend what you know you can pay back when your bill is due.  If that’s not an option, make sure you’re not maxing out your card every month.  Your highest balance gets reported to the credit bureaus, whether you pay it in full right away or not.  If you’re constantly reaching your limit, you appear risky, and your credit score can suffer.

Your score will be used to determine what rates you’ll have to pay for numerous purchases, including cars and homes.  The higher your score, the more likely you are to be approved, and the better your rates will be.  So be sure to consider the future when you’re starting out.  If you aren’t responsible with your credit, you’ll be likely to continue bad habits into the future, and you’ll have to spend extra time turning your history around to raise your score before you bother applying for large purchases.

Above all, be patient.  Time is a big factor in building history.  The longer your positive history is, the better your score, so don’t get discouraged if you’re not seeing immediate results on your credit report.  Negative history is easier to create than positive, so if you continue with good habits from the start, you will notice the payoff when you really need it down the road.

You probably have some major negative marks on your history, such as a bankruptcy, home foreclosure, or default on a loan.  These negative marks are likely to be recent, and the amount of these marks far outweighs any positive history you might have.  Paying off your credit card debt is great and extremely helpful to your credit score, but a foreclosure will weigh it back down like a ton of bricks.

Such a low score is likely to be caused by serious financial problems, and you’re probably well aware of them.  If you’re having trouble paying your bills, your credit will take a hit.  Consistent late payments will bring it down, and the larger consequences like bankruptcy or collections will send it through the floor.  This will make it harder for you to get approved for loans or other new lines of credit.  Even if you do manage to get approval, the terms will be brutal.  Your credit limit is likely to be low, and your interest rates will be outrageously high.

So what can you do to fix it?  At this stage, some professional finance counseling might be a good idea to help you find a good starting point on your personal debt.  Aside from that, the simplest answer is to start establishing good credit habits right away.  Pay your bills on time, and try to focus on paying down smaller debts first to start creating a positive history.  Work at keeping your balances low.  Ideally, you want to use no more than 30% of your available credit.

The last thing you can do is to wait.  The more time you put between the present and your negative history, the more your credit will improve.  Get your credit habits in check in the meantime; then, once you’re back on the right track, you’ll be more likely to stay there.

Credit repair companies cannot legally do anything more than you can do on your own, so really you’re just paying someone else to do something you can do completely for free.  In fact, it’s highly likely that any of these companies that you look into are scams anyway, and you’ll end up paying hundreds or thousands of dollars with no results.  The Federal Trade Commission has yet to see a legitimate credit repair company, and a search on their website for credit repair companies will only bring up articles regarding cases against them, usually resulting in the companies having to pay damages to the defendants.  (And you’ll see the word “deceptive” used in almost every article.  Not a good sign.)

As always, your first step is to obtain your free credit report from each of the three credit bureaus and review it.  Make sure it is free of errors, especially large ones that will dent your score.  If there are errors, take steps to remove them immediately.

Stop using your credit cards, especially for non-emergency purchases, and start paying them down.  A lower balance is always better for your score, so start a plan to budget your finances and pay down your balances.  Open a savings account and use the money you put into it solely for paying down your debt.

Be sure to stay on time with all of your payments, too, and avoid opening new accounts when you’re trying to improve your score.  Too many inquiries reflect negatively on your report.

Beyond these tips that you can apply immediately, your only other step is patience.  The FTC says that “only time, a conscious effort, and a personal debt repayment plan can improve your credit report.”  Establish good credit habits now and keep up on them to improve your score and maintain it.

First, get a copy of your credit report.  You can get a free copy once a year from each of the three credit bureaus (Trans Union, Experian, and Equifax).  If it does happen to have some disputable errors, contact your creditors and the bureau whose report contains the errors and start an inquiry to have them removed.

Once you’ve disputed any errors (or realized all of the “mistakes” are actually your own), you can work on your debt-to-income ratio.  This is an important percentage, as creditors will look at it along with your credit score to determine whether or not they are willing to lend you money.  If your income is high, but your overall debt is also high, this indicates poor financial management and decreases your chances of approval.

Start by adding up all of your recurring debt, including everything that has a monthly payment, such as your mortgage, car and student loans, credit card minimum payments, etc.  (Don’t include monthly expenses like gas, food, or utilities.  These aren’t considered loan payments.)  Divide this total by your gross monthly income and you will get your percentage.  Creditors will look more favorably on you if this number is below 36%, and even if your credit history is less than stellar, a good debt-to-income ratio can help you get approval on a loan that you might not otherwise get.

So what if your number is higher or on the border?  Your first step here is to stop using your credit cards.  Save them for emergencies only.  Better still, start a savings account to use for emergencies so you don’t have to resort to using your credit cards.  Take a serious look at your expenses and see where you can cut back.  You can then place the extra money into your savings account.  (I speak from experience.  You might think you don’t make enough to save, but start with even a small amount, and commit to depositing that amount with every paycheck or once a month, and you’ll be surprised how easy it is to build up a decent balance.)

If you can, pay more than the minimum amount due on your credit cards, and try to make it enough to really count so you’re not paying just interest.  Look into doing the same thing on your loans, provided there is no penalty for doing so.  You’ll want to make sure of that before you go ahead with the extra payment.  Either way, focus on paying down high-interest, revolving debt loans like credit cards first.  Your credit score is boosted higher when you pay these down than when you pay down an installment loan, such as your car loan.

Once you’ve begun lowering your debt, aim to keep your balances at less than 30% of your limit.  Ideally, 10% is the best, but the lower the better, so do what you can.  Of course, it’s going to take time to repair your credit, but it’s better to start now so that you’re ready for your next big purchase or prepared for the next emergency.

It might seem like common sense, but be sure to pay your bills on time and you’ll be building a positive history.  It only takes one slip to place a negative mark on your credit report, and it can take a long time to get it removed.  Consider signing up for automatic payments or establish a good way to remind yourself of your payment due date so you won’t miss it.

You might also be excited by your credit limit, thinking of all the things you could buy.  Try not to be tempted by the lure of “free money.”  You have to pay back what you spend, and if you spend outside your means, you’ll be more likely to start missing payments or only being able to pay the minimum amount due.  It’s also not a good idea to keep a high balance.  Not only could you run out of room for emergencies, but the next time you need to apply for credit, you could be denied or have to accept a lower limit with higher interest rates.  If you’re constantly at the edge of your current credit limit, you appear to be a risky investment for creditors, and they won’t trust you with their money.

One way to help build your credit history is to apply for a loan with a cosigner.  With the help of someone else’s good credit, you could secure a loan with good terms that you might not get on your own just yet.  Once you’ve been approved and you make your payments on time, you show that you are responsible and deserving of good terms, and this will help raise your credit score.

Stay on the right track from the beginning by spending smart, paying on time, and keeping an eye on your overall finances.  You’ll raise your score as quickly as possible and be more likely to keep it high in the future.

While some of these methods may not have sustained, long-term results, it will help increase your rating now so you can quickly get the loan or financing your need.

The first thing you can do is improve your debt ratio. This is the amount of outstanding debt you have as it compares to the amount of available credit. Confused? Let me explain…

If you have a credit card with a $10,000 spending limit, and you have a $5,000 balance, that means you are carrying a 50% debt ratio. If you owe $7,500, you would have a 75% ratio. Basically the closer you are to maxing out your credit lines, the more it hurts your score. Lenders like to see that you have been extended a lot of credit and that you know how to manage it properly.

Statistically, people who are near their credit limit and at risk of maxing out their credit cards are likely to be late on their payments and default on their loans. For that reason, you score suffers when you use too much of your available credit.

Just by lowering this ratio, you can improve your score, and there are two ways to do this. The first is to pay off your balance – simple enough. The second is to re-distribute some of that debt. If you have another card with no outstanding balance on it, transfer some of that balance to the other card. That will reduce your debt ratio.

Another way to quickly increase your score is to make sure you have different types of credit. As mentioned above, lenders like to see your ability to manage credit. That means they want to see your experience in handling all different types of credit and loans.

In order to do that, you want to be sure you have both an installment loan and revolving credit. Revolving credit is like your credit card. Every month you “borrow” money by using your credit cards, and every month you receive  a bill based upon how much you used and the balance you carry.

An installment loan is one where you obtain cash and have a fixed monthly payment plan, which can be 5, 10 or 30 years, for example. A car loan, a home mortgage, or even a bank personal loan are examples of this. So if you get a small personal loan from the bank, deposit the cash in a high-bearing interest savings or CD, and pay your bill on time every money, you’ll quickly boost your score.

The third quick credit fix is to closely look over all 3 of your credit reports. There’s a very good chance that these reports contain wrong information that is hurting your score. It is not uncommon to have late payments on things you were never late for, or an account marked open that should have been closed. Find these mistakes and get them fixed. By law the reporting agencies must investigate and repair the issue.

Download Your Credit Reports

How to Improve Your Credit Score

Your credit score is calculated by the information that is on your credit report. This file contains a history of the past 7 -10 years of your financial behavior — good and bad. It lists all the times you’ve made a payment on time, how many times you’ve applied for credit, how many times you’ve been denied, and of course all the times you didn’t repay your debt.

The number one thing that affects your credit score is if you made your payments on time or not. If you have numerous delinquencies on your file, don’t worry. There are not only ways to remove those items, but the recent information on your file affects your score more than older information. That means that by making changes in your behavior today, you can start improving your credit score. Just by starting to pay on time could dramatically improve your score.

That’s why one of the most important things you can do before improving your score is to get your finances in order. You must make sure your expenses do not exceed your income and put an end to using your credit cards excessively. If you don’t, all the work you do to fix your credit score won’t matter because it will just be damaged again.

Take a good look at your finances and get that in order first. Once you have made a commitment to stop using your credit cards excessively, then you can move forward. Note that this does not mean to stop using your credit all together. It is good to use it at a minimum and pay off your balance every month. This will build a good credit history.

If you are paying your bills on time, there are a few other things you can do to improve your credit score. For instance, you’ll want to closely review all 3 credit reports. Each report may be slightly different in the information that it lists, and according to recent studies, 25% of all credit reports contain information that doesn’t belong there. Find those errors and fix them, and you could see a quick and easy improvement in your credit score.

Get Your Credit Reports

Here are a couple things that they will advise you to do…

How to Raise Credit

A number of studies show that there is a very good chance that your credit score is worse than it really should be. That’s because as hard as the three credit reporting agencies try to keep your credit report accurate, they just are not 100% accurate all the time. The three reporting bureaus have the responsibility of managing billions of transactions between millions of people every single day, and every once in a while your information is accidentally mixed up with another person’s information.

That’s why credit repair experts will first have your download all 3 credit reports. By law, your creditors and lenders do not have to submit information to all of the credit reporting agencies. That means that chances are your credit reports don’t match. For that reason, you need to review all of your files and closely review them for errors. You may find an error on one file, but not the others. That one mistake can greatly affect your credit score.

Imagine a bankruptcy listed on your credit report that doesn’t belong there, or a listing that says you haven’t paid your mortgage hasn’t been paid in a year. That information, whether accurate or not, can deny you credit and even prevent you from getting a job. It is your responsibility as a consumer to regularly review your file and ensure it is accurate.

If you have not reviewed your credit report carefully in the past 3 months, this is the very first step you must take before going forward. Once you complete this step, you can move on to step 2 of how to raise credit.

Download Your Credit Information

How to Establish Credit

1. Find Your Cu rent Credit Rating: It is possible to have no credit history, but there’s a good chance you have some information on your credit report even if you have never owned a credit card. This file includes previous addresses, employment history, a list of companies and people that have tried to pull your credit, and instances when you have applied for credit. While most of these things won’t affect your score in any way, it is still a good idea to know where you stand. Request Your Credit Information
2. Piggyback: The easiest and quickest way to establish credit is to use a technique that is called piggybacking. By piggybacking off your spouse’s or parent’s credit, you will immediately establish credit yourself. To do this, the person you want to piggyback off of has to add your name as an authorized user to one of their credit lines. This is as simple as making a phone call. Note that this works best when piggybacking off an immediate relative.
3. Get Credit: Next, try to obtain a credit card, even if it is only for a $250 credit limit. If you cannot get approved for a credit card, apply for a secured credit card, which is a card that requires some sort of collateral – usually in the form of cash. Once you obtain your card, use it regularly but with moderation. Charging $0.10 is enough to build a credit history. Usage and paying off the bill in full is much more important than how much you use. In fact, the closer you get to maxing out your credit limit, the more it will hurt your credit score.

Follow these three simple steps to establish credit and you’ll have a credit history in no time. Before you begin, request your current credit information. It is completely possible that while you may think you do not have credit, that there is wrong information on your report that could make you have bad credit. If that’s the case, you’ll want to get that fixed right away.

Request Your Credit Information