How to Improve Your Credit Score After Bankruptcy or Foreclosure

Going through a bankruptcy or foreclosure can really do a number on your credit score. Your score can drop by over 100 points or more! But don’t panic – with some time and effort, you can rebuild your credit even after these events.

Here are some tips for improving your credit score after bankruptcy or foreclosure:

Review Your Credit Report

The first thing you’ll want to do is pull your credit reports from Experian, Equifax and TransUnion. You can get free copies of your reports once per year from each bureau at annualcreditreport.com. Review the reports closely – are all the accounts and information listed actually yours? If you see any errors or fraudulent accounts, dispute them immediately.

Getting mistakes removed from your reports can give your score a nice boost. Also make sure any discharged debts show as ‘closed’ or ‘paid’ rather than ‘delinquent.’

Pay All Bills on Time

Going forward, you need to establish a pattern of on-time payments. After bankruptcy or foreclosure, you probably don’t have many open accounts. But make sure to pay every single bill – utilities, cell phone, etc – by the due date. Setting up autopay can help ensure you don’t miss any payments.

If you do have open credit accounts, keep balances low. High utilization rates hurt your score, so try to keep it below 30%.

Become an Authorized User

Ask a family member or friend with good credit to add you as an authorized user on one of their credit cards. Their positive payment history will start to appear on your credit reports and can give your score a boost. Just make sure they have low balances and on-time payments.

Get a Secured Credit Card

After bankruptcy or foreclosure, you’ll need to reestablish credit. Secured cards require a cash deposit upfront, but they are one of the easiest types of credit to get approved for after credit trouble. Use the card sparingly and pay it off each month.

Apply for Credit Builder Loans

Credit builder loans allow you to demonstrate responsible credit use. The lender reports your monthly payments to the credit bureaus. And after successfully repaying the loan, you get the money you deposited upfront back.

Become an Authorized User

Ask a family member or friend with good credit to add you as an authorized user on one of their credit cards. Their positive payment history will start to appear on your credit reports and can give your score a boost. Just make sure they have low balances and on-time payments.

Limit New Credit Applications

Each new credit application causes a hard inquiry on your report, which can ding your score a bit. So go slowly when applying for new credit – space out applications by at least 6 months. And only apply for credit you actually need.

Check for Credit Limit Increases

After about 6 months of responsible credit use, you can ask lenders for a credit limit increase. Higher limits help lower your utilization ratio provided you keep balances low.

Wait It Out

Time is one of the best remedies after bankruptcy or foreclosure. Negative information stays on your reports for 7 years, but its impact lessens over time. Just focus on building positive credit history, and your score can recover.

Rebuilding credit after bankruptcy or foreclosure takes diligence and patience. Check your reports, pay bills on time, keep balances low and limit new applications. With consistent effort, your credit score can bounce back.

Good luck! With commitment to healthy credit habits, your score will be back on track in no time.