Re: How to rebuild your score after a ch7 BK
05-04-2012 08:29 AM
Thats SM. That is a nice write up to help many with questions about rebuilding post BK. From my somewhat limited observation on this site, I think many people try to apply for too many cards too early post discharge. I started with one CC- Capital One and didn't apply for another line of credit for a little over three years.
My only comment is point number 3
3. Use your Orchard Card for <10% of it's balance/month and Pay In Full(PIF) as soon as you get the bill.
a. In other words, if your limit is $300, do NOT charge more than $29/month on the card, ever.
b. If there is an activation/processing charge, that's you're first month's purchase.
c. PIF the day you get the bill, not the day it's due.
d. An easy way to do this is to set up your MyFICO Scorewatch subscription to use your Orchard bank card instead of your debit card.
I agree with most of it except that the FICO scoring system likes to see a balance reported on at least one card. A zero balance will mean you are not using your card at all. If this is the only card obtained post BK, it would likely be better to have a less than 10% utilization reported. The card can actually be used for more than 10% of the CL as long as most of the balance is paid before the statement is generated. Some argue that using ones available credit is motivation to the lenders to increase the credit limit but I'm sure that varies with different banks.
Thanks again. I think this post will be very helpful!
I agree, that's why I said to pay the OB "as soon as you get the bill". Once the bill cuts, OB reports, so it will report the smaller balance.
Also, there are varying opinions around the web on whether or not "high balance" calculates into scores. My personal opinion is that some scoring models use it, some dont. Moreover, this was written for someone who isn't necessarily going to be as anal about their cards as we are on the forums here... so advising not to charge more than 10% on any given card (ever) is a great way to make sure they don't go over 10%.
Finally, this was also written for someone who wants to get their score up after BK, but doesn't have an emergency fund, discipline, or high enough income to pay off the cards in the event of job loss or other catastrophe, so keeping the balances low (perpetually) is a very good idea.
Starting Score: ~470 preBK(8/2010)
Current Scores as of 8/2/13: EX 710, EQ 691, TU 709, all 3 LP for a Mortgage (TriMerge Report)
Goal Score: 700+ FICO across the board w/ my BK still on there (until 8/2020) - I think they're all already there... haven't had a bank pull a trimerge in quite a while.