Generally speaking bankruptcy lasts for 12 months. After this you will be discharged. You will then be released from many of the restrictions put on you when you were bankrupt.
However even after you are discharged the negative effect on your credit rating will continue. Having said that there are certain actions that you can take which will help you improve it in the fastest possible time.
After you are discharged from bankruptcy one of the first things you should do is get a copy of your credit file. The record of your bankruptcy will show for six years after the date you went bankrupt. However it is important to check the date on which any default notices were registered against you.
The date of any default notices should be no later than the date you went bankrupt. If any were issued after this they should be changed. This is important because they will also remain on your credit file for six years from their issue. If this was after the date of your bankruptcy they will continue to drag down your credit rating even after the bankruptcy itself has been removed from your file.
To change the date that a default notice was issued you will need to contact the original creditor. You can request that they change the date and update the credit reference agencies. They must do this in accordance with the data Protection Act.
One of the underlying truths of borrowing is that banks prefer to lend money to people who they know have a good history of repayment. It stands to reason that if you have responsibly repaid the money you have borrowed in the past then you are likely to do the same in the future.
For this reason one of the best ways to improve your credit rating after bankruptcy is to build up a new history of responsible repayment. The way to do this is to start borrowing. However after you are discharged from bankruptcy it will not easy to find anyone who is prepared to lend to you.
One option is to apply for a so called credit repair credit card. These facilities are available to people with poor credit ratings. If you use the card for small purchases and pay the balance in full at the end of each month this will help you build up a record of responsible borrowing.
BE Tip: The interest charged on these cards is very high. However as long as you pay the balance in full each month you will not be charged any interest.
You should not plan to apply for a mortgage as soon as you are discharged from bankruptcy. Some mortgage lenders may consider your application after 2-3 years from your discharge date after your credit rating has started to improve.
Although your poor credit rating is an important factor you will also need a mortgage deposit. If you are a first time buyer this could be 15% or more of the value of the property you are interested in. Because you have been bankrupt you may need an even larger deposit.
Even if your credit rating were to improve quickly the need for a deposit will normally mean you have to wait to apply for a mortgage. Of course while you are saving the deposit your credit rating will also be improving. As such by the time you have saved the money you need the chances of your mortgage application being accepted will be far higher.
It is important to understand that Bankruptcy will not result in your credit rating remaining poor forever. Nevertheless the process of improving it will take time. You cannot expect to be able to start borrowing again as soon as you are discharged from bankruptcy.
However by taking some practical steps such as amending any issues on your credit file and using a credit repair credit card for minor purchases your credit rating will begin to improve. This will make your chances of being accepted for other forms of credit such as a mortgage far better in the future.