After Declaring Bankruptcy: Surprising Attacks On Your Credit Rating

October 20, 2011 by  Filed under: Bankruptcy 

Now that you’ve declared bankruptcy, you’ll need to be more vigilant about your credit than ever before in order to build it back up.

Your credit rating is made up of so many factors; it comes as no surprise that you might be confused as to what can negatively impact your credit score – especially after declaring bankruptcy. We all know that a late credit card payment will take a few points off of your score – however, did you know that there are other surprising attacks on your credit rating that might be keeping you from recovering from declaring Chapter 7 or 13 bankruptcy?

Get ready to investigate the surprising yet influential factors that can severely depress your score – and make every attempt to avoid these all-too-common mistakes:

Settling A Debt For Less Paying off a debt makes your credit score go up. So in what instance could settling a debt actually decrease your credit score? Simple: when you settle your debt for less than what you actually owe. Many financial experts believe that you’re better off leaving an account open than settling for less than what you owe; however, if you use this move, you run the risk of having the account enter into collections, which will surely deflate your credit rating. Either way, if you’re looking at a debt that you can’t pay off, your credit score will lower, period. If, after declaring bankruptcy, you still have debts you owe, be sure to settle your debt through a credit counseling agency with a great reputation to earn as few penalties as possible.

Inaccurate Limits Credit card companies are notorious for reporting false and inaccurate limits to credit bureaus – and if credit bureaus think that you’re using more of your credit than you actually are, you’ll get penalized on your score. For example, if you’re only using 40% of your credit limit, yet a false report makes it look as though you’re using 80%, then this will artificially deflate your credit score. Make sure that your credit card company is reporting an accurate limit in order to avoid this undeserved penalty.

Additionally, it’s always a good idea to check your credit report for any errors that might be dragging your score down. After all, you may have a low credit score due to bankruptcy, but that doesn’t mean you shouldn’t be vigilant about protecting your credit score.

That Overdue Library Book Yes, that exciting novel that you forgot to return a year ago will certainly have an effect on your credit score in many cases. Why is this, you might ask? Simple: more businesses and government programs are relying on collection agencies to pursue late payments on everything from overdue library books to unpaid parking tickets. If you owe any kind of debt – no matter how minor it may seem to you – make sure you pay it in full in order to avoid the dreaded collection agency.

Transferring Balances Transferring a balance to a new credit card with a low interest rate will certainly help you to pay off that debt that you owe – but don’t forget that doing this will lower your score by a few points. However, this loss can be recouped in a short period of time; just don’t have a shopping spree with the card that has no balance. After all, you don’t want to end up back in hot water with your creditors.

Reed Allmand, sponsoring attorney for, is constantly looking for ways to provide the best financial information for his clients. Whether you are considering filing for bankruptcy, or are currently going through a Chapter 7 or Chapter 13, visit for up to date news and information you need to know.

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