Kentucky Credit Repair after Bankruptcy

How to improve Your Credit Score after Bankruptcy

Your FICO credit score uses 5 factors and a 950 score is possible. Filing bankruptcy will only drop a 500 score about 20 points at first.  By paying on time after bankruptcy scores may increase 100-200 or more points within 2 years.   By paying on time on 3 forms of credit Home mortgage, car loan and a credit card your credit score will rapidly increase.  Applying with or Opening credit with buy here pay here car lots and finance companies will actually hurt your score or at least will not rebuild it as well as accounts with banks.   FICO is used by mortgage companies and the major banks the other scores such as Beacon are worthless.   The five FICO factors are.  

1. Previous Credit History 35%  (After Bankruptcy as old unpaid records drop off and you make payments on time your score improves.)

2. High levels of Debt to Income 30%  (After Bankruptcy your debt to income is reduced increasing your score)

3. Limited Credit History 15%

4. New Credit Applications 10%

5. Limited Types of Credit 10%

Prime, sub-prime, and Damaged Credit

Prime If your credit score is above 600, you are considered a "prime borrower" and you have no problem getting mortgages, cars, or credit cards. 

Sub-prime Credit scores below 600 are "sub prime".   You may have higher interest rates but there are lenders.   This extends down to about 500 the lower your credit score the higher your rates and harder it is to get credit.   

Damaged Credit Credit becomes too expensive to use. You buy on cash. Below 500 is the Damaged Credit Zone. You may get a credit card but at such high fees and uselessly low credit limits that credit is too expensive. Your interest is double the normal rates for prime borrowers.  You pay more for insurance and may be barred from some jobs.   Bankruptcy is often your only way to repair damaged credit.  Old unpaid debts drop off  and as you repay on time, credit is repaired.     

How much does a Damaged credit score cost you?

Credit Cards   The few credit cards that are available for people with damaged credit have very low credit limits, high fees.  These lenders do not report your good credit activity making it impossible to repair your credit with them.  

Automobile Financing. If you have damaged credit the increased interest you pay for auto financing costs even more.

Home Mortgage The cost of a home can more than double if you buy a home from a subprime lender at higher rates.  Even a very small cheap home will cost between $100,000 and $180,000 more in interest if you are buying a home with damaged credit.  We used actual mortgage rates for 2003 and 2004 to show your costs below. 

Repair your credit score

Now that you know how your credit score is calculated and the costs, you can begin to repair your credit score. Here are the 4 things that will help after bankruptcy. 

• 35% of your score.  After Bankruptcy pay your bills on time and your score will improve over time. 
• 30%  Bankruptcy will dramatically lower your Debt to income ratio.  Keep your balances low on credit cards. Have less than 7 open accounts.
• 10% Rarely apply for credit.  Applying for credit often lowers scores.    
• Make sure the information in your credit report is correct. Removing negative items on your credit report has the largest impact on your FICO score. Use our letters in the forms section.

Bankruptcy Credit Repair  Bankruptcy Credit After  

Bankruptcy Credit After  Bankruptcy Credit Repair

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