| Your credit rating is a number between 300 (poor) and | | | | should only be used as a last resort. A declaration of |
| 850 (good), also known as a FICO score which stands | | | | bankruptcy can remain on your credit files for up to |
| for Fair Isaac & Co, the company who developed | | | | ten years and will bring your credit rating down |
| the first scoring systems in the 1950s. The rating is | | | | considerably making it harder to get loans and credit |
| compiled by three credit reporting agencies: Experian, | | | | cards as well as pushing your interest rates up. It is |
| Equifax and Trans Union from a number of factors, | | | | important to start building up your credit rating again as |
| including: | | | | soon as possible after bankruptcy. |
| - How long you have had credit and what type of | | | | How can I improve my credit rating after bankruptcy? |
| credit | | | | There are a number of ways to begin building-up your |
| - Your payment history and outstanding debts | | | | credit rating again. Although some creditors will see |
| - How many applications for credit you have made in | | | | bankruptcy on your credit report and decide not to |
| the past | | | | accept your application, others may be more lenient |
| - 'Black data' - bankruptcies, defaults, late payments | | | | and take into consideration your most recent financial |
| - Any past dealings with the company you are | | | | dealings. If you can prove that you can manage your |
| applying to | | | | money well, then the outlook wont be all bleak for the |
| Your credit rating is important because banks and | | | | next ten years. Some things that you can do to heal |
| lenders will use it to determine which of their products | | | | your credit rating are: |
| you are eligible for. If you have a poor credit rating | | | | - Stick to the repayment plan that was agreed when |
| your interest rates will be higher and the amount of | | | | you filed for bankruptcy |
| credit you can apply for lower. It also affects | | | | - Make your payments on time, late payments will only |
| mortgages, buying a car, renting property and a | | | | add to a poor credit rating |
| number of other factors that will be important in your | | | | - Pay off more than the minimum amount if you can |
| life. | | | | afford to |
| What is bankruptcy? | | | | - Open a savings account and deposit a small amount |
| Sometimes a person finds they have more debt than | | | | each month |
| they can possibly pay back. This may happen for a | | | | Taking out a credit card after bankruptcy may be the |
| number of reasons, a person may accumulate debt | | | | last thing you feel like doing, but if you take out a |
| over a number of years until they suddenly realize it | | | | secured credit card and use it strictly within your |
| has gone out of control or perhaps they have invested | | | | repayment budget each month you will build up a |
| in a business that collapsed. Bankruptcy results when | | | | financial history indicating responsible use of credit, |
| both the creditor (the people lending money) and the | | | | which will help to improve your credit rating. It is also |
| person in debt realize that there is no chance of | | | | worth applying for copies of your credit report from |
| repaying that amount of money back. The person in | | | | the credit reporting agencies (Experian, Equifax and |
| debt then files for bankruptcy. Filing for bankruptcy | | | | Trans Union) and checking them for any errors. |
| means that the creditors cannot pursue the person | | | | Although bankruptcy will be listed on your report it is |
| owing them money outside the repayment terms in | | | | important to make sure there are no mistakes that |
| the bankruptcy agreement. This helps to alleviate | | | | could unfairly add to a low credit rating. In some |
| some of the stress because the debtor is not being | | | | locations you may find 'debtor education programs' |
| constantly pursued by creditors and there is a clear | | | | which will help you to develop strategies for |
| payment plan, which can involve some aspects of the | | | | re-establishing a good credit rating. To find out if there |
| debt being wiped. | | | | are any in your area, or for information on credit |
| How does bankruptcy affect my credit rating? | | | | counsellings, contact the Federal Trade Commission: |
| Bankruptcy may seem like an easy way out, but it has | | | | ust.cc. / 1-202-514-4100. |
| a very bad effect on your credit rating, which is why it | | | | |