tradelines and bankruptcy

30 Oct 2018

After bankruptcy, do tradelines increase file age and credit scores?

[NOTE: THIS CONTENT WAS MIGRATED FROM OUR DISCONTINUED FORUM. IT’S GREAT CONTENT AND COMMENTS NEEDED A NEW HOME]

The short answer is, “yes.” But, there’s obviously more to it and the answer (no matter how complex) depends entirely on why you’re asking. For example, if the answer is “yes” and you’re trying to get a loan which has an automatic denial for those with bankruptcy, then that good sounding answer becomes irrelevant. But, if you’re credit goal is not dependent bankruptcy considerations, then, as a threshold matter, we can move on to further consideration.

adding tradelines after bankruptcy

It would absolutely increase your file’s age (otherwise known as you “average age of accounts.”). Note, this only applies to lending institutions, because they are required to consider spousal authorized user tradelines under the law (but do not distinguish between spousal and non-spouse accounts).

In fact, after bankruptcy – and assuming the accounts were discharged – your credit would be positively affected by adding seasoned tradelines, because the positive accounts (which were added) would, obviously, outweigh the negative (which we discharged). In addition, and as shown in the image above, it would increase your average age of accounts relative to the account that remain.

Also, there’s something interesting in that graph. How could there be a remaining account after discharge of a bankruptcy? It is possible to “redeem” accounts during a bankruptcy in certain circumstances. Most people wipe the slate clean, but it may make sense to retain certain, positive, accounts.

When does chapter 7 bankruptcy come off credit report?

The next issue is how long chapter 7s stay on credit reports. The difference between chapter 7 and 13 bankruptcy is irrelevant. How long bankruptcies affect your credit is the only question. There is a two part answer: The average credit score after chapter 7 is a different question than whether a lender would close a loan with a bankruptcy reporting.

As stated above you could redeem certain accounts, add tradelines and have a good credit score and a lender still may deny you because he or she may require a certain amount of time after the bankruptcy before your application will even be considered. In this regard, you could use the Fair Credit Reporting Act to your advantage if the bankruptcy is not reported correctly. Suppose there is an error with its reporting, you can have the error corrected or the account completely removed if they fail to correct it (or sue the credit bureaus, which is effective, but expensive).

This is a little tangent prone, but certainly some food for thought concerning tradelines and bankruptcies.

3 thoughts on “After bankruptcy, do tradelines increase file age and credit scores?”

  1. Kate said:

    “Bren,

    I agree with Robbie’s post above 100%.

    I wanted to add one thing, however.

    While he’s correct, I think we could expand on that “go to different lenders”. In additions, while tradelines will work to boost your score and “back date” your profile, you should definitely check with your lender first. Make sure your lender understands what you are doing and that they’re not going to waste your time when you get to underwriting.

    Thanks you for your question”

  2. Bren, that must be the coolest question I’ve seen on our forum yet. Thanks! My team has actually been in debate about this in the past. I’ve had [consultations with Bankruptcy attorneys][1] to find the answer. Even thought I’m answering you below, I am not giving tax, legal or financial advice ?

    Okay, yes, it is complicated, but I have an easy answer for you, followed by an explanation.

    Answer: Yes, you would increase your average age of accounts (AAOA) by adding tradelines that precede the date of your bankruptcy.

    Explanation: People think, after a bankruptcy, that their credit report history “starts over” as if they just started their credit file, as was the case when they were in their teens getting their first credit card. This is not the case, at all. Although a discharged bankruptcy and a “new” credit file can share some of the same characteristics, in terms of the effect on you credit score, they are drastically different. For example, your age (among many other factors) has an [effect on your credit score][2] and a discharged bankruptcy has no affect on your age (or many other factors). These are unnecessarily complicated considerations, so I’ll just cut to the chase.

    In a bankruptcy, you can “reafirm” debt. For example, let’s say you had two accounts; [an upside down mortgage][3] you want to discharge and a 20 year old credit card with perfect payment history you want to keep. Well, in most cases, you can apply for reaffirmation of the good debt while still discharging the old “bad” debt. This is up to creditors and United States Trustees, but whether or not you get to reaffirm a specific debt, the bottom line is that it is possible to do. Here’s an example of a reaffirmation agreement proposed by Honda Finance (just as an example):

    ![Reaffirmation of Debt | Average Age of Accounts][4]

    Therefore, a discharged bankruptcy puts no limitations on the age of a line on your credit report, before, during or after discharge.

    Following this logic, it is clear there is no limitation on adding a seasoned authorized user tradeline to your file. Make sense?

    Now, you might raise a few eye brows when you walk into a lenders office, have a bankruptcy two years ago and a 780 credit score. ? They’ll get over it. Authorized user tradelines are fine, having an average age of accounts that pre-dates your bankruptcy’s discharge is fine also. If a lender really busts your chops about it, go to another lender, because someone is going to underwrite you and those who don’t will lose out on a transaction… you will win.

    I hope that helps.

    Let me know if you have any other questions.

    Thanks,

    [1]: http://spacecoastlaw.com
    [2]: https://superiortradelines.com/credit-scores/real-credit-score/
    [3]: http://creditrepairconnection.com/shortsale/short-sale-late-payments/
    [4]: https://superiortradelines.com/wp-content/uploads/2013/10/Reaffirmation-Example.jpg

  3. I have a discharged bankruptcy from May 2012, a little over a year ago. Coming up on 2 years, I guess. Obviously, all my new accounts (which are in good standing, by the way), are in good standing, but I have a lack of age or whatever it’s call “average age of accounts” which is bringing down my score, or I guess not letting my score increase.

    My questions is if I had like a 10 year seasoned tradeline, would I actually increase my average age of accounts or would it get cut off and I only receive the benefit of 2 years because my bankruptcy was discharged two years ago?

    I know that’s a weird questions and I can elaborate if I didn’t explain it well.

    Thanks! Bren

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