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The following is a guest post from Jackson Ross @ www.greatcreditscore.org, stop by his site for more great articles.

The term “Bankruptcy” has such a negative connotation that even when it is absolutely necessary, most people will resist it. Many consumers know that a “BK” will remain on their credit report for 7 to 10 years and they envision themselves struggling financially over the next decade of their lives. But contrary to what most people think, it is possible to get your credit score up (even into the 700 range), just a few years after you have filed. So, how can you boost your score to an almost prime credit level in a short period of time?

Most people that are struggling with bills, house payments, and debts do not have perfect credit. Late payments, high credit balances, and defaults can weigh a credit score down like a rock. So when a person with a troubled financial history files for BK, surprisingly their score may even increase slightly. The bankruptcy will still appear in bold black lettering on the credit report, but many of the outstanding problems will be erased. After the bankruptcy, loans or credit cards will be difficult to get until you have proven that you are back on your feet. A higher credit score is a signal to lenders that you are recovering.

Most people don’t realize that credit scores are not static. They move and adjust as your financial situation changes. For example, if you lost your job and were carrying large credit card balances to cover your house payments, your credit might go down due to a high “Credit Utilization Ratio” factors. But if you were then forced to file for BK because of these debts, your credit report would most likely be wiped clean of this outstanding credit card balance. If you were then able to find a job, pay all of your bills on time, and maintain a good financial history for a period of time, your score would begin to increase.

From what i have seen and heard, many people in similar situations have been able to increase a mid-500’s credit score to a low 700 score in around 2-4 years time. Most creditors would consider a low 700 score to be considered very “low risk”. Risk assessment is the main purpose of a credit score. A credit score is simply a numerical representation of the risk you would present to a potential creditor. It serves as a time saver for companies that do high volumes of applications for loans or credit. And, it can help to reduce the amount of time a company has to spend looking into a person’s background. If you are able to recover from a bankruptcy, some creditors may see this as a positive.

So, if you have a bankruptcy how can you get new credit?

After you go BK, it can be difficult to find a credit card with a reasonable interest rate. One solution to this problem may be to “not get a credit card at all”. One workaround to this problem, is to use a debit card or a secured credit card. Debit cards can be used to report back to all 3 credit bureaus to build a positive credit score. This is possible by simply using them as if they were a credit card.

For example:

When a cashier at the grocery store asks “do you want to pay with credit or debit”, say “credit” and just use your debit card. This transaction will then be reported back to the 3 bureaus and help you build a better credit history.

You may also want to look into a secured credit card. This type of credit card works similar to a debit card, in that the money is withdrawn from an account. Many (but not all) report these transactions to the credit bureaus and over time will help build up a positive credit history. If you do decide to get a secured card, make sure it reports transactions to the bureaus and also that you won’t be overwhelmed with its fees. The downside to many secured cards is that they can be “fee traps”. There are good companies that offer high quality secured cards, but there are also alot of irreponsible companies that are looking to take advantage of your bad credit situation. You need to make sure that you aren’t overpaying for transaction fees, deposit fees, monthly fees, etc.

Add your side of the story to your credit report.

When you are applying for credit, renting an apartment, or getting a new job, your credit report will often be requested. One thing you can do to help get lenders, landlords, or employers on your side after a BK is to give a statement to the 3 credit bureuas that explains why you went bankrupt. This statement will be included on your credit report next to the bankruptcy. The bankruptcy will still be there, but an explanation of a hardship that led to the BK (like a job loss or medical issue) can go a long way. Especially for landlords and employers.

A bankruptcy is like a financial “re-boot”, so once the process is completed, the bad habits need to stop. Many financial experts recommend setting up a strict budget to ensure that you stay living within your means. You can also take the step of weening yourself away from credit cards completely. For some people, credit can be a trap, but you can avoid this problem by using a debit card or secured card. If you can make all payments on time, do not carry a credit card balance, and spend responsibly for the next 2-4 years you will notice a good sized increase in your credit score. With enough hard work and time you will be well on your way to a good credit score.