Credit and bankruptcy

Ask the expert: Credit and bankruptcy

This week's expert: Jill Stevens from Experian BBC News Online's Ask the Expert column gives readers a chance to have their financial questions answered. This week, Jill Stevens from Experian, a credit reference agency, provides advice on obtaining credit after bankruptcy. Your Money reader, Theresa, has been a discharged bankrupt for more than a year and is struggling to get credit. "I have applied for credit cards but get turned down, obviously because I'm an ex-bankrupt. How do I start to repair my credit?" she asks. Your bankruptcy discharge confirms that you have been released from the debts you owed when you became bankrupt (although there can be exceptions, such as student loans). It also means that you can now apply for credit without the restrictions a bankruptcy order imposes. But even though your bankruptcy has been discharged, it will stay on your credit report for six years from the date of the order. I would guess this is why you've been turned down - although you'd have to ask the lenders you applied to as only they know the actual reason. Improving chances Meanwhile, there are things you can do to mitigate the effects of the bankruptcy. Get your credit report from credit reference agencies (Experian, Callcredit and Equifax). These will cost £2 each. If the bankruptcy is not shown as discharged send the agencies a copy of your certificate of discharge so they can update their records. This will improve your chances of getting further credit, but before applying, check with the lender first. If they absolutely won't lend to people until a bankruptcy has disappeared from the record, it's a waste of time applying and could mean you have credit applications listed on your report for no good reason. Too many of these can in themselves hamper your chances. Higher rates Your credit report may show debts that were included in the bankruptcy - so check that these are marked as paid. If they're not, the agencies will sort this for you. They can also add a short statement (Notice) to your report for you explaining any special circumstances that led to your bankruptcy (like redundancy or illness) and pointing out which debts were part of the court order. You will find "sub-prime" lenders willing to lend to you at higher interest rates, but don't be tempted to pay way over the odds - ask the mainstream lenders about their lending policies first; and never go to a credit repair company - they will charge you for what is often really poor advice. Good advice comes free from the credit reference agencies or organisations like Citizens Advice. Even after the six years is up and the order has disappeared from your report, you may have to declare that you had problems as some mortgage lenders ask if you have ever been bankrupt. But for things like credit cards and personal loans, the bankruptcy will disappear for ever in a few years.