A UK bankruptcy is typically discharged after one year but the credit impact can last for years. Bankruptcy details and the associated debts remain on the credit file for at least six years. Though a note may be added indicating that the debts were included in a bankruptcy, the bankruptcy details alone are usually enough to damage the credit score. Rebuilding the score becomes top priority because a low credit rating can prevent an individual from qualifying for loans, credit cards, and a mortgage.
It takes time to rebuild a credit score and in the meantime, lenders may offer only their highest interest rates. The first step to rebuilding the score is ensuring that information on CallCredit, Equifax, and Experian credit reports is correct. If the reports contain inaccurate information, contact the relevant credit reporting agency to have it corrected.
A prepaid credit card is a responsible tool for rebuilding credit. A credit check is not required to qualify and the monthly fee is treated as a loan. Each monthly payment is reported to the credit agencies, helping to improve the credit score. After one year of repayments, this loan will be listed on the credit report as repaid. To use the card, make deposits to the account to receive a credit limit of the equivalent amount.
Avoid using co-signers for any new credit because this does not create a strong financial standing with future lenders. If you are denied credit and cannot find it elsewhere, save money until you have enough to pay for items with cash. If you are not using a credit account, close it. New lenders look at the amount of credit available to you, in addition to what you currently owe, when making credit decisions. Having only a few credit accounts and managing them effectively is the best approach.[needhelp01]
To protect against fraudulent use of your credit, register on the Electoral Roll at your current address. Review your credit reports regularly to identify suspicious or unfamiliar information. Address potential issues by immediately notifying the relevant lender. If you have joint accounts, make sure the other account holder takes the same preventative measures. Before applying for new credit jointly with a partner, make sure that individual does not have credit issues.
Bankruptcy does not wipe away all debts so review your financial obligations to identify any that were not covered. Continue repaying these debts to prevent any additional harm to the credit score. Paying other bills on time and in full will also help rebuild the credit score. If full repayment is not possible, pay at least the minimum required amount on time each month.
Request a credit increase from credit card lenders every 12 months. Do not apply for too much new credit at the same time because this will negatively affect the credit score. Instead, look for the best deals, focusing on lower-interest credit from credit unions and banks. Eventually, unsecured forms of credit may be offered, allowing you to improve credit scores without providing an asset as a guarantee.
