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Dear Dr. Don,
I filed bankruptcy and it was discharged in December 2005. My most recent credit score is 630. I still own my
home and have never made a late payment. I have student loans that I have never defaulted on along with a car payment.
After the bankruptcy, I opened a new credit card account that I have never been late on, although
I maintain a balance of 50 percent of the limit. With all of the accounts in good standing, how long will it be
before my credit score rebounds back to 700? I feel like I will never get a decent rate on a car loan or a new house.
-- Brandy Bankruptcy
Dear Brandy,
You're making all the right moves in staying current on your student loans, mortgage and car loan.
Getting a credit card post-bankruptcy and staying current on that card was also the right thing
to do. Paying the balance down on the card will help improve your credit score by reducing your credit utilization
ratio. I don't think you need to pay off the credit card debt, just bring it down to 10 percent to 25 percent of
the available credit line.
Picking up a second credit card isn't a bad idea if it's been at least a year since you received
the first credit card. It's important to wait a year before applying for a second credit card because a credit
application stays on your credit report for two years, but only impacts your credit score for one year.
The concern, of course, is your ability
to responsibly handle access to additional credit.
If you aren't sure you can control your spending,
keep things the way they are.
In the feature
"Boosting your post-bankruptcy credit score," Bankrate's Bankruptcy Adviser Justin Harelik has some
additional suggestions. They include making sure you have credit from a major bank. So, choosing who provides that
second credit card can make a difference.
Use Bankrate's credit card search
feature to shop for lenders, but only apply to one lender. Multiple loan applications bring down your credit score.
Because of the bankruptcy, your credit
score is slow to improve, despite your payment
history with your mortgage, car and student loans.
A Chapter 7 bankruptcy filing stays on your credit
report for 10 years. Accounts included in the
bankruptcy filing, however, are only reported
for seven years from the filing date.
A Chapter 13 bankruptcy filing stays on your credit report for only seven years. The clock starts
ticking from the bankruptcy filing date, not the discharge date.
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