Can Bankruptcy Improve My Credit Rating ?
When you file for bankruptcy, information on your bankruptcy stays on file for up to six years. On top of that, bankruptcy restrictions can apply to you for upwards of fifteen years. When credit lenders see these marks on your record, you will be marked down on your credit score. The reason this happens is because many lenders fear that since you could not honour your past obligations, there is no guarantee they will be reimbursed. Many lenders use information provided by a credit reference agency to determine exactly how much a bankruptcy will affect your credit rating.
Can My Credit Rating Improve Eventually?
Since we now know that your credit rating will definitely be impacted negatively after filing for bankruptcy; the next question to ask is whether or not your rating can improve eventually. The simple answer is yes. No matter how bad you may think your credit rating is because of your bankruptcy, it is important to remember that you can always turn it around. With a little hard work and financial planning, even the dreariest credit ratings can be fully repaired.
If My Bankruptcy Is Annuled, Is My Credit Affected?
In this circumstance, your credit will not be affected. The biggest thing to know is that if your annulment was not made public, proof of annulment will be required by the credit reference agencies. After sending proof, the credit reference agencies should have no problem updating your credit reference file to show current proof of annulment. In cases where the bankruptcy should have never happened, the credit agencies will completely wipe your file clean of any negative connotations.
Many of you may be wondering what happens to your credit reference file when your bankruptcy is fully discharged. When this occurs, the credit reference agencies automatically receive information regarding your discharge status from the EIIR (Electronic Individual Insolvency Register). Once this information is received, the credit reference agencies can begin to process your discharge. Your bankruptcy discharge statement is the single biggest factor in improving your credit rating after bankruptcy. Once this paperwork shows on your credit reference file, repairing your credit rating is as simple as a hop, skip, and a jump. Your credit reference file should reflect your discharged status no later than three months after you have been discharged from your bankruptcy. This process happens automatically with no obligations placed on you. Remember, it is never a bad idea to confirm that your credit reference file does in fact reflect your discharged status. Just keep in mind it may take up to three months to fully process.
Tips to Remember
Tip 1: After being discharged from your bankruptcy, ensure that your credit reference file has been properly updated to reflect your discharge status.
Tip 2: Start applying for credit and make sure you pay off the debt associated with these new credit accounts. This will help to establish your trust with lenders and gradually improve your credit rating.
Tip 3: Do not become discouraged by your credit rating during the bankruptcy process. There are many factors involved that will determine your final rating. Just because your rating may be low does not mean the world is ending. There are many ways to improve your rating after your discharge has been fully processed.
Tip 4: If your bankruptcy is annulled, ensure that the credit reference agencies are made aware of your annulment. If the annulment was not publicly addressed, then it is your responsibility to ensure they receive the proper paperwork so your annulment can be processed on your credit reference file.
Tip 5: Lastly, remember that there are nearly 48,000 people every year that file for bankruptcy in the UK. You are not the only one going through this. Seek outside support and use all resources available to you in order to better your life after the bankruptcy.
Andy Gorton is the author and editor of the Bankruptcy Clinic
Posted in Bankruptcy