Getting ready for 7 years after Chptr 7

[150mph]

Got my discharge June '07 - amost five years now. In June '14 I hope my credit will revert to normal. Use cash/debit for everything, and save all i can, a good learning experience. I've had problems finding a place to rent with my BK but it was worth it.

Got a Capital One no fee 3k limit Mastercharge right after discharge - my only credit card, got it only to build credit. Don't use it much but charged up close to my limit several times, paid in full ea. month. Had a secured card for a while but fees were lame. Not interested in fee cards, get lots of offers for them.

Would like to have good credit again some day. Don't think this single CapOne card is going to make my credit look very good and wondering if I should be more aggressive in rebuilding my credit?

Also does the BK just disappear off my credit report after 7 years?

[HHM]

First, a chapter 7 stays on your credit report for 10 years, not 7. So, sorry to burst your bubble on that one.

Second, there are ways to rebuild credit and it generally only takes 2-3 years from discharge.

The primary method is to get 3 trade accounts (you only have 1, the CapOne, you need 3). And re-establish some credit usage. Actually use the cards and pay them off each month.

Life generally takes care of the rest. Most people end up buying a car or a house at some point after BK and finance that purchase, so that helps.

Sorry to hear your credit rebuilding has been a challenge. I actually applaud you, because credit is over rated.

[df04527]

Yes the BK's will just disappear from the filing date TEN years from the filing date not the discharge date.

I would recommend one more credit card and pay monthly to begin to rebuild your credit payment history. Use your existing card regular as well. Never have a monthly balance of more than 10-20% of the limit though. Credit payment history is 35% of your score! Paying in full each month is not going to build payment history. Are you able to afford a car payment? Even a used car is fine as long as they report. Different types of credit are 10% of your score. hth

[msm859]

Yes the BK's will just disappear from the filing date TEN years from the filing date not the discharge date.

I would recommend one more credit card and pay monthly to begin to rebuild your credit payment history. Use your existing card regular as well. Never have a monthly balance of more than 10-20% of the limit though. Credit payment history is 35% of your score! Paying in full each month is not going to build payment history. Are you able to afford a car payment? Even a used car is fine as long as they report. Different types of credit are 10% of your score. hth

I disagree. You should pay in full each month and never carry a balance -- why pay over 10-20 Percent interest on any money. I would probably also recommend actually having more than 2 cards. If you read forums i.e. Myfico the people "interested" in their fico score consistently talk about paying in full with very high scores. The only debate is whether you are better off having a zero balance on all your cards or by having only 1 card carry a 1 - 9 % utilization. However, your "fico score" is only a snapshot at that single moment. You should minimize the "costs" of rebuilding your credit i.e try to avoid cards with annual fees, paying interest etc. Your problem of not starting sooner is your AAoA average age of accounts is going to be low because of the late start. Get a couple more cards and try to get a couple with higher limits and when the bk drops off you should be looking real good.

[150mph]

Thanks for the replies. Don't know where I got that 7 yr. figure. Disappointing but no big deal I guess.

I'll have to look around for other no-fee cards. I don't want to keep balances and pay big interest because I don't make much and have little job security. I should donate to banks what little $ I have hoping they'll like me better? I can't see getting any kind of long term loan like for a car though I really need a replacement. I'm just trying to stay afloat and employed and in good health and hope the economy improves so the job market gets better, but I'm not optimistic it will anytime soon. Guess I should change my handle to 50mph...

[Floridagail]

At least the negative accounts will fall off at 7 yrs from the last del pmt. But the court records will take 10yrs. If you want a high credit score again, you will need a couple more cards on credit report and of course keep them at less than 10%. I had started in Feb checking my fico score and report. Tu 629, EQ 657. found a few errors on my report, disputed them and now my score have jumped Tu 699, Eq 689. The Free Facko scores do not count really, most creditors use Fico. I have 4 cards. I am aiming for 720.

[df04527]

I disagree. You should pay in full each month and never carry a balance -- why pay over 10-20 Percent interest on any money. I would probably also recommend actually having more than 2 cards. If you read forums i.e. Myfico the people "interested" in their fico score consistently talk about paying in full with very high scores. The only debate is whether you are better off having a zero balance on all your cards or by having only 1 card carry a 1 - 9 % utilization. However, your "fico score" is only a snapshot at that single moment. You should minimize the "costs" of rebuilding your credit i.e try to avoid cards with annual fees, paying interest etc. Your problem of not starting sooner is your AAoA average age of accounts is going to be low because of the late start. Get a couple more cards and try to get a couple with higher limits and when the bk drops off you should be looking real good.

This is one of the more common mis-conceptions that credit rebuilders have. There are different types of situations. For people rebuilding a score you must prove to the lender you are credit worthy again and will pay what you've agreed to again, every month, without fail, on time and at the cost of a few bucks of interest. Remember credit rebuilders typically just defaulted on all their debts which in turns just told all lenders you cannot keep the committments you made. If you pay off every month how are lenders to know you CAN keep your committments again? That is why payment history is 35% of your score. Credit rebuilders who pay off every month (because they want to avoid interest of a few dollars) lose the huge benefit of the payment history score bumps. Lenders want to see a post negative event payment history that is flawless and in turn you are rewarded with score increases.

People who have little to no re-buiding to do benefit greatly from paying off in full each month - they do not need the 35% score bump but they are saving huge dollars on interest with bigger credit limits. Additionally they qualify for the prime cards like american express.

I was on fico dot com for years. I do not frequent that anymore very much as i don't care for the attitudes over there. My personal opinion of course.

[IBroke]

Credit rebuilders who pay off every month (because they want to avoid interest of a few dollars) lose the huge benefit of the payment history score bumps. Lenders want to see a post negative event payment history that is flawless and in turn you are rewarded with score increases.

It is true that lenders want to see a payment history, but I have to disagree on the underlined part. A "payment-history" - when it comes to credit-scoring - is not defined by the reported balance. It is defined by the question if you made your payments on time or not. Anything else is not considered by those 35% of your FICO. So in a manual review, a potential creditor could be asking himself if you are indeed credit-worthy if your reported balance - and as a result, your monthly payment - is $0 every time. But FICO only knows the term "pays as agreed" unless you missed a payment so it doesn't matter how much you pay every month. That can be the minimum payment, the entire balance or if you don't carry a balance, no payment at all - your payment-history will be scored as "paid as agreed", so there is no difference. In theory, this also means that a consumer who has a $0-balance and who's not using his CC for a year would have the same payment-history credit-scoring as if he would use the card every month and had a balance reported.

Paying off your CCs every month saves you interest - but it won't get you single point advantage over somebody who maxes out his/her cards every month and pays them off a month prior to applying for credit. The only balance that is considered by FICO is your CURRENT balance, not the balances you carried before. I'm sometimes too lazy to handle each and every CC so that it reports a $0 balance. But when I'm seeking credit, I do. That's how I obtained my refi auto-loan.

[df04527]

There is mountains of data that is collected about each account, most of which, is not viewable by the average Joe. Lenders take care of Lenders and this system was created for this exact purpose, you can depend they have all kinds of historical data as each account has several codes they are flagged with. What may have worked for you particular situation is terrific but is not so much the normal or if that is what everyone does then they are not rebuilding as fast as they could. Payment history is not 35% of your score for no reason. 30% of your score is balances. They go hand in hand. If you always show a zero balance what do you think happens?

"Payment History
Account payment information on specific types of accounts (credit cards, retail accounts, installment loans, finance company accounts, mortgage, etc.)
Presence of adverse public records (bankruptcy, judgements, suits, liens, wage attachments, etc.), collection items, and/or delinquency (past due items)
Severity of delinquency (how long past due)
Amount past due on delinquent accounts or collection items
Time since (recency of) past due items (delinquency), adverse public records (if any), or collection items (if any)
Number of past due items on file
Number of accounts paid as agreed"

[HHM]

We are starting to get in a debate about the margins of credit scoring.

You need to "use" credit to "maximize" rebuilding of credit. There is no discernible advantage to carrying a balance month to month. You do need to keep your credit utilization less than 20% of available credit. Keep in mind, the credit score is merely a snap shot of your credit report at a particular point in time (when the report is pulled). The credit report is a dynamic report that changes constantly. You really don't need to waste money (even if its just a few cents or dollars) on interest to carry a balance month to month. Odds are, the balance is getting reported at some point even if you pay it off each month. The card I use for all personal expenses, even though I pay it off each month, when I pull my credit report, it generally will have some sort of balance referenced.

Here is ALL you need to do after discharge.
1. Get a credit card, any credit card will do. Try to get one with out an annual fee, try to avoid secured credit cards as well; but get what you can get.
Odds are, that card will have a $500 to $1000 limit. So, if a $500 limit, charge no more than $100 in any billing cycle and pay it off each month.
2. In about 4-8 months, you will probably start getting more mainline credit card offers. Apply to the pre-approved cards.
Note, if your first card does have an annual fee or is a secured card, if they won't waive the fee, cancel it. Don't worry about "credit history." credit history is measured on a span of years, not months. So the 6-12 months you have that card is immaterial in the long run.
3. Your goal is to have 3, prime rate credit cards, which you should be able to do within about 12 to 18 months after discharge.
Keep up credit usage but be mindful of the 20% rule.

Time will heal the rest. And so will life. At some point you will probably apply for a car loan or a house. That will help (but NEVER finance a car for the sake of rebuilding credit. In fact, you should be focused on paying cash for cars).

[df04527]

Amen..... Wears me out...lol

[msm859]

..........

Here is ALL you need to do after discharge.
1. Get a credit card, any credit card will do. Try to get one with out an annual fee, try to avoid secured credit cards as well;.........

HHM, what is the downside to a secured card?
My first credit card was secured from a credit union with a $1500 limit, then I got a secured card from BofA with a $3,000 limit, now I have an unsecured card from Capital One for $1,000 and then a Barclays reward card for $4500. I think the higher limits on some cards makes it easier to get other cards with higher limits. The only card with an annual fee is from BofA - $39. I will give them 1 year and if they don't convert to an unsecured/no fee I will cancel. Both of my secured cards report to the credit bureaus.

[HHM]

The downside to a secured card is the tying up the funds for security. That is not an optimal use of those funds. You get what you can get, but you should avoid secured cards if you can so the money tied up in the security can be put to better use.

[IBroke]

There is mountains of data that is collected about each account, most of which, is not viewable by the average Joe. Lenders take care of Lenders and this system was created for this exact purpose, you can depend they have all kinds of historical data as each account has several codes they are flagged with. What may have worked for you particular situation is terrific but is not so much the normal or if that is what everyone does then they are not rebuilding as fast as they could. Payment history is not 35% of your score for no reason. 30% of your score is balances. They go hand in hand. If you always show a zero balance what do you think happens?

"Payment History
Account payment information on specific types of accounts (credit cards, retail accounts, installment loans, finance company accounts, mortgage, etc.)
Presence of adverse public records (bankruptcy, judgements, suits, liens, wage attachments, etc.), collection items, and/or delinquency (past due items)
Severity of delinquency (how long past due)
Amount past due on delinquent accounts or collection items
Time since (recency of) past due items (delinquency), adverse public records (if any), or collection items (if any)
Number of past due items on file
Number of accounts paid as agreed"

I'm not saying that a lender can't see how you handled an account in the past - I just said that the FICO-score in regards to "payment-history" won't be any different in regards to the balance you carry each month. Paying as agreed means paying as agreed and delinquent means delinquent. There is nothing in between.

If I would always carry a $0 balance on my accounts and the lender would still report/update the account on a regular basis, nothing is going to happen any different than if you would be carrying a balance. A balance affects utilization - not the payment history.

Just check out the definition you just posted about "payment history" and ask yourself where in regards to that definition it would make a difference if you carry a balance or not.

Account payment information on specific types of accounts (credit cards, retail accounts, installment loans, finance company accounts, mortgage, etc.) - No difference
Presence of adverse public records (bankruptcy, judgements, suits, liens, wage attachments, etc.), collection items, and/or delinquency (past due items) - No difference
Severity of delinquency (how long past due) - No difference
Amount past due on delinquent accounts or collection items - No difference
Time since (recency of) past due items (delinquency), adverse public records (if any), or collection items (if any) - No difference
Number of past due items on file - No difference
Number of accounts paid as agreed" - No difference

Payment history simply focuses on the question if you pay/paid your obligations as agreed. How you meet that (carrying a balance or not) is up to you.