Your Credit Score After Bankruptcy

720 Credit ScoreIf your credit score has dropped below 7:20, then you need to learn the seven steps to a 7:20 credit score as it could be a sign of financial distress.

What Happens When Your Score Goes Below 720?

When your credit score goes below 720 you start paying higher interest rates on your mortgages, your car loans, and even your credit cards.

How To Raise Your Score

The first step is getting the balances of your credit card under 30 percent and if your balance is over 50 percent on a credit card, it actually counts against you. It ruins your credit. So you have to get under 30 percent and once you get under 30, then you can start adding points to your credit score.

Now, what happens if you can’t get under that 30 percent? That’s when you need to look at a debt relief option. You need to look at a different solution. For example, you might need to get on credit counseling, might need to settle some debt, or you might even have to consider bankruptcy.

Now, if somebody does file bankruptcy, would that be the first step to help him with that 720 credit score? Ironically, it is because the first step to a 720 credit score is to get out of debt and bankruptcy will get you out of debt. It gets rid of the debt that’s bringing your score down so that you can rebuild. It is just going to depend on what’s best for them.

So what is the best solution to find for like getting rid of debt?

Well, it’s going to depend on the person’s situation. What we do is we look at their income, their asset, and what type of debts they have. For some people it’s credit counseling, others its loan modifications and others are looking at bankruptcy.

After you file for Bankruptcy, how do you build back up?

Well, what you do is you actually establish three new lines of credit loan, and you get an installment loan and you clean up your credit report from the bankruptcy and you always check it for errors. And if you follow those steps, that will get you back on the right track. If you follow those steps, you can improve your credit score to a 720 just within one year after filing bankruptcy.

After the filing of bankruptcy, your credit score will either increase or decrease depending on your previous credit information. Your credit score is calculated based on the following items:

  • Your Payment History
  • How Much Debt You Owe
  • Length of Credit History
  • Your Credit Mix
  • Credit Inquiries
  • New Credit

Factors in Your Credit Score

The two largest areas that make up your credit score are “Your Credit History” and “How Much Debt You Owe”.  For example, if you carry a high debt amount on credit cards and have a bad payment history, the filing of a bankruptcy increase your credit score.  Your credit score can improve after the filing of a bankruptcy because the debts are discharged and the credit card companies can no longer report negative marks to the credit bureaus.

Generally, your credit score will return to a satisfactory level after 2-3 years.  You can improve your credit score after bankruptcy by doing the following:

  • Obtain a secured credit card.  The benefit of this card is that it will be reported on your credit report and can build a positive payment history.
  • Make all payments on time
  • Dispute any incorrect information on your credit report
  • Open new credit accounts

To find out about improving your credit score after bankruptcy, contact us by Phone at (801) 432-8682. We can help you with bankruptcy consultation in Utah.