Smartmoney.com recently printed an article describing how filing bankruptcy can improve a person's credit report. The article recognized that most people filing bankruptcy have poor credit ratings prior to filing. Once a bankruptcy case is filed and a bankruptcy discharge issued, the debts listed on the credit report should be changed to "included in bankruptcy" and "discharged in bankruptcy" with a "0" balance owed. These changes to the credit report stop the negative credit reporting and permit positive credit notations to remain (for reaffirmed debts), thereby stabilizing the person's credit.
A person filing bankruptcy has his or her credit report compared with other bankruptcy filers, rather than with a person who has a perfect credit score. This method of comparison provides a better predictor of credit risk, according to Fair Issac, the company who creates the "FICO" score.
The article suggests four ways of raising your credit score after bankruptcy: first, make sure that your credit report includes the correct notations for each debt listed on the report; second, obtain new credit cards (secured, if necessary); third, try to become an authorized user on another person's credit card so that their good credit notations will become part of your credit report; and fourth, try to obtain vehicle loans or a mortgage within a year or two of filing bankruptcy.