How soon will my credit score improve after bankruptcy?
The decision to go bankrupt is never taken lightly and can come with various consequences, one of the most critical being how bankruptcies affect your credit. When someone declares bankruptcy, this means that they aren’t able to repay their debts and have chosen to go down a legal route in order to fix their financial situation, which credit rating agencies take very seriously.
In terms of credit rating and bankruptcy, your bankruptcy will be visible on your credit report for six years. Lenders are often very reluctant to extend credit to someone who has a history of bankruptcy, as statistically, this places them at more risk than offering credit to someone without the same history.
It is possible to rebuild your credit score after bankruptcy, but it is important to note that this will take a long time, as well as diligent financial management on your part. It is always advisable to speak to a professional within this field, as this will drastically increase your chances of being able to do so.
The good news is that there are steps you can take to see your credit score begin to improve fairly rapidly, but bear in mind that it will likely take years to get back to a good credit rating after bankruptcy.
It should be noted that the information provided within this blog should not be taken as legal advice and is merely for educational purposes. Should you want to seek legal counsel with a member of our team, you can contact one of our offices in London, Norwich or Portsmouth or use our enquiry form.
How to begin improving your credit score
Using credit cards
This may seem counter-intuitive, especially if credit card debt was a contributing factor to your bankruptcy in the past. However, using credit cards for standard payments and then paying the balance off immediately so there is no added interest can signify to the bank that you are responsible and pay off your debts.
Ideally, it would be recommended to use a card with high-interest rates but low credit limits in order to have the optimum effect on your credit score. These particular cards are commonly marketed as 'credit-builder cards,' but they may not be suitable for everyone. If you are uncomfortable with the potential risk of high interest rates, consider opting for a card with a lower interest rate instead.
It is crucial to borrow an amount that you can comfortably repay using the funds available in your bank account. Additionally, setting up a direct debit to automatically pay your credit card bill can help ensure that you never miss a payment and promptly pay off your balance.
Organising your finances
It is important to develop a realistic budget that considers your income and expenses. Give priority to essential payments while allocating funds to address any outstanding debts. By diligently adhering to your budget, you can showcase financial responsibility and gradually enhance your creditworthiness. Timeliness in payments plays a vital role in the process of rebuilding your credit score.
You should also ensure that you pay all your bills, including rent, utilities and other financial obligations, on time. Setting up direct debits or automated reminders can assist you in staying on top of your payments and avoiding any missed deadlines. Consistently making punctual payments demonstrates your reliability to lenders and exhibits responsible financial behaviour.
Another potential strategy would be responsible borrowing. It will likely be difficult to obtain traditional credit immediately after you are declared bankrupt, however, if you are able, responsible borrowing could help build your credit. We recommend looking for credit-builder loans or small loans specifically designed for people who are trying to build up their credit.
It’s also crucial that you only borrow what you can comfortably repay and always make payments on time. Taking on excessive debt can increase your financial burden and make it challenging to meet your repayment obligations. You should always carefully assess your budget and determine the amount you can comfortably allocate towards loan repayments each month. Borrowing an amount that aligns with your financial capabilities demonstrates responsible borrowing practices and reduces the risk of getting in debt.
Register on the electoral roll
Registering on the electoral roll can come with a lot of benefits in terms of improving your credit score. When you register to vote, your information is added to the electoral roll. Lenders and credit reference agencies often use this as a method of verifying your identity and address when they need to assess credit applications.
Being on the electoral roll shows that you are in a stable situation and demonstrates that you live at your stated address. It also assists lenders in confirming that you are a real person and that there is less risk of fraud. Being on the electoral roll indicates a higher likelihood of residing at the same address for a significant duration. This factor boosts lenders' confidence in your capability to handle credit responsibly.
Essentially, being registered on the electoral roll can yield substantial benefits for your credit score, as it offers lenders a dependable means to authenticate your identity and address. This verification process establishes a sense of stability and credibility in the eyes of lenders, ultimately bolstering your creditworthiness.
It is crucial to ensure that you regularly update your information on the electoral roll to fully capitalise on this advantage and enhance your overall credit profile.
Contact our credit score solicitors
If you have recently been declared bankrupt and are looking for solutions to improve your credit score, our solicitors are able to advise on these matters. Our team have years of experience in this area and have helped many clients improve their credit score with practical, sound advice.