Question Increasing credit score during chapter 13

[Nwagtmustang]

Hi there. I am halfway through a 3 year chapter 13. I would like to increase my credit score so when it is discharged I would get better rates for future loans. What I have done so far is this.

Got a car loan for 14k
Secured credit card for $300. Pay it off every month.
Builder loan that costs $10 a month and paid off in 12 months.

Is there anything else I can do to increase my score that will show I have been responsible once my bk is discharged? Right now my fico score is at 600

[justbroke]

Welcome to BKForum!

Hi there. I am halfway through a 3 year chapter 13. I would like to increase my credit score so when it is discharged I would get better rates for future loans. What I have done so far is this.

Many of us have thought about this and took "some" steps to ensure a good bounceback once discharged.

Got a car loan for 14k

Did you have permission to do this? In most jursidictions a Chapter 13 debtor can't incur any (new) debt without permission. In some very limited district, a Chapter 13 debtor can incur debt up to $5,000 without permission (aggregate).

Secured credit card for $300. Pay it off every month.

I would let about 5-8% (not more than 8%) report. This is the AZEO method which is all zeroes except one. The issue is that the card doesn't count if it reports $0 (except for age and missed payments).

Builder loan that costs $10 a month and paid off in 12 months.

These are good, but I wouldn't do a 12-month! Because as soon as it closes, you lose the benefit of an installment loan in your credit mix (which accounts for 10% of the FICO score... about 85 points overall).

Is there anything else I can do to increase my score that will show I have been responsible once my bk is discharged? Right now my fico score is at 600

Talk to shipo for the definitive guide.

[Nwagtmustang]

For the car loan yes, had permission from the courts. 14 percent interest. The builder loan is only good for a year. It will show payment history. My question is, is there anything else I could do? I'm going to buy my mom's house once I'm out of bk and I qualify for a VA loan, so I don't need money down. Once I purchase the home, I want to buy a fun car. My income has increased alot due to new job, and my bk payment increased a little due to that. Financially I can afford all this. Just want my score to increase to get better interest rates.

[shipo]

While I have exactly zero experience building a credit score while in a Chapter 13, I was reasonably successful once I got my discharge. In spite of some initial mistakes, after nine or so months my FICO scores hit the high 600s and then hovered between there and the low 700s for the next 15 months.

Regarding rebuilding while in a Chapter 13, it is my understanding there isn't much stock one can put into their numbers prior to the discharge; they can bounce up and down a fair amount, and where they stand the day before the discharge versus the day after can be quite a difference.

All of the above said, it sounds like you're doing just about every thing which can be done at this stage of the game.

[flashoflight]

If you qualify for membership to Navy Federal, they are BK friendly even with a non-discharged 13 and their $200 secured credit card could become $2000 unsecured in just six months. I would stick with the minimum deposit because if it is too large, it may exceed Navy's limit for BK folks which may make the card impossible to unsecure. For a mortgage FICO (I didn't pay any attention to the other scores) with AZEO and 5% utilization, 675 seems to be the ceiling for me unless the BK is missing from the credit report which was the case in one of my three reports. I was told by my loan officer that 675 is very high for a chapter 13 FHA manual underwrite. So yeah, you will probably end up in the high 600s and that will be it for quite a while.

[shipo]

If you qualify for membership to Navy Federal, they are BK friendly even with a non-discharged 13 and their $200 secured credit card could become $2000 unsecured in just six months. I would stick with the minimum deposit because if it is too large, it may exceed Navy's limit for BK folks which may make the card impossible to unsecure. For a mortgage FICO (I didn't pay any attention to the other scores) with AZEO and 5% utilization, 675 seems to be the ceiling for me unless the BK is missing from the credit report which was the case in one of my three reports. I was told by my loan officer that 675 is very high for a chapter 13 FHA manual underwrite. So yeah, you will probably end up in the high 600s and that will be it for quite a while.

Agreed; my FICO 5/4/2 Mortgage scores hovered in the mid to high 600s during my Chapter 13 and then gradually inched up to 720/739/738 between when the discharge was granted and when the bankruptcy fell off my credit reports earlier this month; now they're sitting at a fairly comfortable 802/806/817.