How to Improve Credit While in Chapter 13

A Chapter 13 bankruptcy allows individuals with steady income to develop a plan to repay all or part of their debts, according to the Administrative Office of the U.S. Courts. Under this chapter, a repayment plan is configured where installment payments are made to creditors over three to five years.

A Chapter 13 bankruptcy can remain on a credit report for up to 10 years after it is discharged. If you're filing bankruptcy, your credit may already be impaired, but there are ways to improve your credit while in Chapter 13.

Instructions

1

Make current payments on time. When loans and debts are reorganized, you'll be set up on a payment plan through the Chapter 13 bankruptcy court. It's imperative that you make payments on time to creditors and mortgage holders, especially if you're already behind. In doing so, you'll begin the process of improving your credit.

2

Apply for new unsecured credit cards. This is the fastest way to improve your credit rating when recovering from bankruptcy. Look for creditors such as Orchard Bank that offer credit cards to individuals with impaired credit. You can expect to be extended an offer for a card with a low credit limit. You can also anticipate upfront processing or administrative fees that will be charged to your card. It's extremely important that you keep your credit under control when you're trying to improve your credit score. Make payments early or on time and don't exceed your credit limit.

3

Apply for a secured credit card. If your credit rating does not permit you to obtain a traditional credit card, you may find yourself applying for a secured credit card. With a secured card, like the Centennial Classic offered by First Premier Bank, you will simply submit a security deposit that's equal to your credit line. Monthly payments are made, just like you would normally submit to a creditor, and reports are made to the credit bureaus. With secured cards, you're typically charged fees upfront for processing or account opening.

4

Apply for a secured line of credit. If you have a title to a paid-off vehicle, a title to a piece of property or home equity, you may be interested in applying for a secured credit line. This is where you use your asset as collateral, allowing the lender to feel confident that you'll repay the loan (or they'll become the owner of your collateral item).

5

Secure a cosigner as a last resort. If your credit is too poor for you to find an unsecured card, and you don't have any assets to offer, you may need to find someone to cosign a loan with you. How the information is reported to the credit bureau will depend upon the type of credit card or loan you secure with your cosigner.

You may find that both you and your cosigner have information being reported on your credit bureau report, or you may find that it is only being reported on the cosigner's account. In the latter situation, you'll want to inquire with the creditor as to the amount of time the cosigner needs to remain on your loan. When the time is up, simply have the cosigner removed, and the reporting will begin on your own bureau report.