Repair your credit file after bankruptcy and get your finances back on track.
Bankruptcy has an ongoing impact on your financial circumstances, even after you are discharged from bankruptcy or have it annulled.
For starters, your name will be on the National Personal Insolvency Index (NPII) permanently, with a record of how your bankruptcy was resolved. It will also be listed on your credit history for up to five years, or longer depending on the circumstances.
While these details can affect your ability to get new credit, there are ways to improve your credit history and increase your chances of loan or credit card approval in the future. This guide looks at the steps you can take to repair credit history and ways to maintain good credit so that you can move past bankruptcy once it is over.
How to repair your credit file after bankruptcy
You can repair the bad credit rating that comes from having bankruptcy details listed on your credit file by building up healthy financial habits. This can be done with the help of a credit repair specialist, or on your own using the following steps:
- Work on your employment circumstances. The financial security that comes from having stable employment can improve your credit rating by showing lenders you have a regular source of income. A permanent or ongoing job will also help your overall financial circumstances, so it is a great first step to take.
- Grow your savings. Assets such as savings can improve your credit rating by showing lenders you have the ability to financially manage your accounts and make loan payments. Start by regularly putting money aside, even if it is just a small amount that you transfer to a dedicated savings account, and remember every little bit counts.
- Consider getting a term deposit. If you have a lump sum of money you can put into a term deposit account, you may be able to use it to get a secure loan that will help re-establish your credit accounts.
- Limit your credit applications. Too many credit applications can negatively affect your credit history. After bankruptcy, it’s important to be selective about the types of credit you apply for to increase your chances of approval. If possible, only apply for one product at a time and look for options that are likely to be approved, such as secured loans, options with a guarantor or joint accounts.
- Make payments on time. Whether you have a secured loan or an electricity account in your name, making sure you pay the balance on time will help you build up good credit history after bankruptcy.
- Talk to issuers. If you want to apply for a particular product after bankruptcy, or find out what options are available, consider calling up banks and other lenders to discuss your situation. They will be able to advise you on your eligibility and answer any specific questions that you have to help you find options that will work for you.
The longer you focus on these six key things, the greater the impact will be for your credit file. So it is important to realise this process does take time, but is definitely worth it in the long run.
Can a credit repair agency help me fix my credit file after bankruptcy?
There are a number of credit repair agencies that claim they can improve your credit report. These 'credit fix' or 'debt solution' companies may advise you on your credit file and act on your behalf to challenge any incorrect listings on your credit history but may not be able to do much to actually fix your credit file after bankruptcy.
In fact, the government’s MoneySmart website warns people to “be wary” of these companies as they “may not always be able to do what they claim”. So if you are interested in getting a credit repair agency to help you improve your credit file, make sure you compare different options and research their services so that you know exactly what you are paying for.
What types of credit cards can I get after bankruptcy?
If you want to apply for a credit card after bankruptcy, it’s important to look for cards that have reasonable eligibility requirements for your circumstances. Some options include:
Such a card comes with a low minimum income requirement, and would offer little in terms of features. However, this could be the right type of tool to manage your finances.
You could consider applying for a low credit limit card once you’re back on track in terms of spending and saving. The low credit limit would ensure that you don’t spend beyond your means, but you might have to pay a high interest rate.
Some credit cards allow you to apply with another person, which means both your credit histories will be assessed for the application and you will share responsibility for the account. If the other applicant has a good credit history, it can increase your chances of the credit card being approved so that you can start building up a good credit score.
Remember that it could take time before a lender is willing to approve your credit card application after bankruptcy, so try to have patience. The most important thing under these circumstances is that you work towards better credit history, so only apply for a card when you are confident you’ll meet the eligibility requirements and can manage the account responsibly.
Compare Low Income, Low Credit limit and Joint-account Credit Cards
What are the pros and cons of declaring bankruptcy?
- No more dealing with unsecured creditors. You don’t have to worry about being harassed by any of your unsecured creditors, and these creditors can no longer proceed with legal action to recover their money through courts.
- Protect some assets. Even when you go bankrupt, you get to hang on to most household goods, ordinary clothing, tools of your trade, life insurance and endowment policies, superannuation that you haven’t accessed before bankruptcy, and compensation payments received for personal injury.
- Effect on creditworthiness. The bankruptcy ruling stays on your credit file for while, and during this period getting any kind of credit is near impossible.
- Name on National Personal Insolvency Index. Once you file for bankruptcy, your name remains on the National Personal Insolvency Index (NPII) for life.
Frequently asked questions
I went bankrupt about 8 years ago and I want to be able to get a loan. How do I get back on my feet?
Once you get out of bankruptcy, it’s important to learn how to manage your new spending habits and handle your finances carefully. On thispage, you can find invaluable information and tips on getting your life back again after dealing and declaring personal bankruptcy.
I was bankrupt 10 years ago, will that still affect my credit file?
Bankruptcy details are listed on your credit file for two years from the discharge or annulment date or five years from the beginning of the bankruptcy – whichever comes later. As a result it should have been removed from your credit file now.
I was discharged from bankruptcy a year ago. Can I apply for a credit card or loan now?
Yes, but the details of your bankruptcy will still be on your credit file, which could affect your ability to get approved for a credit card or loan at this time. You may want to focus on improving your credit history to increase the chances of getting your application approved in the future.