 Boosting your post-bankruptcy credit score
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 Dear
Bankruptcy Adviser,
Why should I care about a bankruptcy on my credit
report? Six years after being discharged, my credit
score is 736. Does it still make a difference?
-- Sharon
 Dear
Sharon,
This is a great question. You may have "ghost credit,"
and I'll get more into that in a minute, but first things first:
Congratulations! I have no doubt your improved credit score
is the result of hard work. There is more you can do to improve
your credit and I hope this article will give you, and everyone
else in similar situations, a few ideas.
You should always care about every mark on your credit report. When a lender is deciding whether to give you access to their money, they rarely make a mistake by saying, "No." "No" is their default answer and anything that leads them down the path to saying "no" is worthy of concern.
However, once you've done everything you can do, let it go. Because bankruptcy information stays on your credit report for 10 years, you have four years to go before the bankruptcy mark can be removed.
During those 10 years, there are negative consequences to having this mark on your report.
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Consequences of bankruptcy: |
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Now, let's talk about "ghost credit." You
may have it and there's not much you can do about it, but you should
at least know what it is. Four years from now, Sharon, your
credit report will be squeaky clean, but it won't go back before
your bankruptcy. In other words, your credit history will only
be 10 years old. Negative but accurate information comes off
credit reports, but positive accurate information stays on forever,
so people who have not declared bankruptcy have credit reports that
look different than yours.
Underwriters looking at your loan application may
take into account your "ghost credit." That is, the underwriters
will ask themselves, "what happened to Sharon before these
10 years?" Of course, it's none of their business, and
in the scheme of things, it's not nearly as important as what has
happened recently (which is reflected in your credit score). However,
underwriters are careful people and they would prefer a positive
credit history of long standing over a positive credit history of
comparatively short standings and ghost credit. This is not
something to worry about, because you cannot go back in time, but
it is worth understanding.
Here are some ideas for how you can accelerate the restoration of your credit and squeeze some extra advantages out of the system:
If you haven't already done
so, make sure you have accounts with major banks. Many times
after bankruptcy, people must get credit cards and loans from less
well know financial institutions. Once you've held some of
these cards for a while, if possible, switch over to accounts with
big banks. The reason is when they say "yes," their
affirmations carry more weight.
If you have a car loan, consider
refinancing it. If you bought a car with a four- to six-year
payment plan and your credit score has improved at all, you could
qualify for interest rate and payment decreases.
If you haven't asked for an
increase of your credit limit in a while, do so. The formula
for determining your credit score depends on how much credit you
have available. For example, you may be eligible to have your
credit limit extended from $3,000 to $8,000. That extra $5,000
increases your credit availability, and that could help your credit
score.
If you know how, take a look at your report at least once a year or work with someone who can. Improving and maintaining your credit is a lifelong endeavor and every detail counts.
Justin Harelik is a practicing attorney in Los
Angeles. To ask a question of the Bankruptcy Adviser, go to the
"Ask the Experts" page
and select "bankruptcy" as the topic.
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