Making Bankruptcy Work for You

It may not seem like it, but bankruptcy can work for you if you want it to. Even though your bankruptcy will remain on your credit report, you can rest assured that you are not going to be marked for life. In fact, you will find that many companies will work with you even with a bankruptcy on your credit report.

It is important to note however, that there will be some barriers to your getting back on your feet. Rebuilding your credit takes some effort and strategy on your part, but it is not impossible. You can turn the bankruptcy to your advantage. This section will show you how.

1. Deleting Credit Report Errors in 48 Hours

This is the absolute fastest way to correct any mistake that are made on your credit report and raise your credit score at the same time. However, you cant do this yourself. It can only be done through a mortgage company or a bank. If you apply for a bankruptcy home loan and find errors on your credit report, you can ask the loan officer to conduct a Rapid Rescore. However, you must be sure not to do this every time you apply for credit or you can find yourself in bigger problems.

The Rapid Rescore strategy will take some time however because it requires proper paperwork. For starters you will need proof that the item is incorrect. To do this, you will have to get the creditor to admit such on your behalf. For example, you can get a letter stating that the account is not your account, a letter stating the account was paid, a release of lien notice, a satisfaction of judgment, a bankruptcy discharge, a letter for deletion of collection account or anything else that will substantiate your claim.

This is the same type of documentation that a bank or mortgage company would require from you for the credit accounts anyways. The difference is, now you can improve your credit score and receive a lower interest rate with it instead. The results are not guaranteed and will run you about per account, so you should really be wary about taking advantage of it.

2. Deleting Bad Credit

This is the most area where you've heard of all the scams reported before. Credit repair clinics charge a huge fee for their services and promise you a clean credit report. Sometimes they even claim that they can give you a new credit profile! People are now spending hundreds, or even thousands, of dollars for something they can do themselves, which just ticks me off. Why? Most people dont realize that they can clear up their credit on their own.

Removing your credit errors is simple. Deleting negative credit that is accurate requires some help. Credit report mistakes easily disappear by using a simple dispute letter. Its that simple. If you have the paperwork proving that the error is real like I said above in Rapid Rescore, send copies of that along with the dispute letter. This will make the credit bureau's job easier and you will get your results quicker.

If you don't have the documentation to prove that there are mistakes, you should send the dispute letter anyway. According to federal law; the credit bureaus have a reasonable amount of time to validate your claim. They will have to contact the creditor for verification of your dispute. From here the account will be reported properly or it will be deleted. It has been generally accepted that the reasonable amount of time is about 30 days.

3. Ride Someone Elses Credit Coat Tails

This is a fast and little known way to boost your credit score. But it requires a very trusting relationship. Basically, someone else will have to add you to their credit account for this to work. For example, when you are applying for a credit card, you may have seen the section to add a card holder. This is where you will want to add someone to your account because their payment history is now going to be reported on your credit report too. If they have perfect credit, now you will also have a perfect credit account.

If you want to make this even better, use an aged account. What I mean by this is that if your friend or family member has a 10 year old credit card account with a perfect payment history and a balance of only half of the credit limit that means that this will become part of your credit history as well. The easy part about this is that this person just calls the credit card company and requests a form to add a cardholder.

After this is done and the account is activated, their entire account history and future is now completely attached to your own. If you could secure 3-5 of these accounts; particularly if they are installment accounts your credit will reach the sky.

The hardest part of doing this is finding someone who has the good credit that will be willing to add you. Think about it; you already have a low credit score and bad credit, how eager do you think someone will be to make you a joint cardholder? Even your parents don't want you to damage their credit.

Heres how you can get them, you do not need to possess the card, and you just need your name on it! In other words, the person who adds you could add you as a card holder and never give you the card or PIN or any information on it. Since the bills and all account information are still going to be sent to the persons address, you won't know anything about the account. Explaining this to people could give you many people who are willing to do it. And you still benefit with a higher credit score.

4. The Round Robin Plan

This strategy is one of the oldest credit building tricks you can pull. It used to be handled through secured savings accounts. But now, it's much easier to do because they have secured credit cards. In fact, I've used this method myself.

Here's how it works: Take ,000 (or whatever you can afford) and get a secured credit card. Once you get the card, get a cash advance of 70% of your credit limit. Now get a second secured credit card. Once you get this one, you will want to get a cash advance of 70% of your credit limit on this card. Use the money to get a third secured credit card. Once you get the card, get another cash advance of 70% of your credit limit.

Now that you are finished getting the cards, you will want to open a new checking account with the final cash advance. You will use this account only for making payments on your three new credit cards. If you make your payments on time every month, your credit score will get better because you now have three new perfect payment credit cards.

It is important that I point out that at first, your credit score might drop a few points because of the fast, and multiple accounts being opened. However, if you wait for about 4 months and have no new accounts or any delinquencies of any account, you will see your credit score increase.

5. Pay on Time

This one is kind of obvious, but I can not stress this any further. If you dont your credit score will decrease. This happens no matter how late your payment is. For some reason people still think that if they are only a few weeks late, its all good. Well, for the loan company, if you pay late but consistent, they make a lot more money with late fees and more interest. For you, this means lower credit score. If you think in the long-term and credit score, you will see what I mean.

6. Pay Down Your Debts

You have to remember that youre dealing with high-level statistics and probabilities which evaluate and forecasts trends in your paying behavior. You can never pay off your revolving debt completely. Think about it. Your credit score is a reflection of your ability to manage your credit. If you pay off your debt you are not managing your debt.

If you maintain a balance of nothing, you have nothing to manage. It no longer exists. And you cannot manage what is not there. Therefore, when you are thinking in terms of credit score, you have demonstrated your ability to swiftly pay off accounts so that you can avoid managing them.

Dont get me wrong; if you're over extended to begin with you will want to pay off what's necessary to make your credit profile look great. Then you need to manage the remaining credit. That is how you decrease your credit score. Creditors want to know that you can manage your credit account so you have to have a balance to do that.

7. Don't Close Any Accounts

Even if you pay off continually revolving debts, do not close the account completely. The longer an account is open with no negative reports on it, the better it reflects in your overall credit score. This occurs because the creditors weigh in the averages in the credit score formula. Many credit experts will tell you to maintain a balance of 30% of your credit limit. However if you keep it at 70% you will still keep a healthy credit score.

8. Dont get New Credit

You have to steer away from getting any new credit unless it is absolutely necessary. Every time you apply for credit, an inquiry is added to your report, and every inquiry that is made drops your credit score. When you have fresh credit, there is no track record how you will manage your credit account. Why risk the drop? You have to remember, your credit score is about risk assessment.

You should get credit for your housing, transportation, college or continued education and 3-5 credit cards. That's really all you need anyway unless extravagant spending is what youre looking for. If you want more credit, request an increase on your current cards rather than apply for new ones.

9. Mix Credit Types

If you show creditors that you can handle different types of credit at the same time, you are rewarded with a great credit score. To do this, get installment loans for car, personal loan or mortgage. Get revolving credit as well like credit cards: Visa, MasterCard, Gas cards, department stores, etc. By mixing it up, you will be able to demonstrate that you can manage your credit because you will have short term and long term credit with a fixed payment plan in place.

Keep these accounts open with a balance of 70% or less and be sure to pay them on time and watch your credit score soar.

10. Don't File For Bankruptcy or Foreclosure

Here's the most obvious advice: Don't file for bankruptcy or foreclosure if you can avoid it. These reports will stay on your credit report for 10 years and always decrease your credit score. If you are looking to quickly rebuild your credit history after a bankruptcy or foreclosure, I would recommend that you use the Round Robin strategy that I mentioned above and get secured credit cards. Now you can even get a car loan or mortgage right after bankruptcy.