Rebuilding Your Credit After Bankruptcy
Once you have filed for bankruptcy, you may wonder how your credit will be impacted. It is a question we get asked time and time again. We’re happy to tell you that with some monitoring and careful work, your credit score will go up once again! In fact, many people find that once their personal bankruptcy is discharged, their credit score will get a boost! There are some simple things to do for rebuilding your credit after bankruptcy. We’ll show you how.
Obtain a Secured Credit Card
You may think that getting a new credit card after a bankruptcy sounds counterintuitive. However, it is one of the smartest things you can do to help to rebuild your credit. It may take a couple of months after you file, but showing creditors that you can pay your bills on time is a step towards getting your credit repaired. Most credit card companies will offer you a secured credit card- meaning you put a deposit down which typically equals your credit line. Once you make several on-time payments, they will usually increase your limit. After some time, they will either offer you an unsecured credit card or you can apply with another lender for an unsecured card. Remember to use your credit cards responsibly and to always make your payments on-time and balances low!
Monitor Your Credit Closely
After a bankruptcy, it is very important to make sure to watch your credit score. There are many apps and websites around that can help you do so for free! This makes it very easy, but it is a very important step. The reason being that you want to make sure that the steps you are taking are helping to build your score up. If you see a derogatory mark on your credit report while you are trying to rebuild, it is important to follow up with it. You don’t want to leave anything on your credit report that could hurt it. The great news is that it won’t take long to see some positive results! Keeping your utilization down, making on-time payments and keeping your credit standing good will help you make a big impact faster than you may think!
Report Payments to Credit Bureaus
Did you know that your rent payments can be reported to the credit bureaus? If you are paying rent, your landlord can report your on-time payments to the three major credit bureaus: Equifax, TransUnion and Experian. In addition to this, some lenders may even like to see payments to utility companies and cell phone company’s as well. Every little bit of work helps!
Become an Authorized User
This option can help you more than you think- but it is important to make sure to only ask someone that you trust. This is where a family member or friend adds you to their credit card account. This means that you are able to use their credit (or not) and gain the benefits of their positive credit history and on-time payments. Be sure to make sure that the person you ask has a positive credit history- their negative history can impact you as well.
Budget for Your Remaining Debts
Sometimes in bankruptcy not all of your debts will be discharged. Things like child support, student loans, or if you filed a Chapter 13 bankruptcy and have a repayment plan, can still mean that you do have outstanding bills to pay. The goal here is to make sure that you are in a financial position to repay your debts and the new debt you incur after bankruptcy. If finances were something you struggled with before you filed for bankruptcy, it is important to pay attention to the new debt you are incurring. Additionally, it is very important that the debts you are repaying are paid on-time.
Keep track of your spending habits to get started. Apps like Mint and Credit Karma are helpful to give you a snapshot of how you are spending your money. Cut back where you can if you are finding yourself overstretched. Make goals for yourself so that you always have some money set aside for your debts. Building up some savings is a great way to do that so you always have a backup plan, if needed.
Avoid Credit Repair Companies
After your bankruptcy is filed, you will receive many offers in the mail from many different kinds of companies. Everything from car dealerships to credit repair companies and more. Be wary of any company that promises that it can erase your bankruptcy from your credit report. Legally, it takes about 7 years or so for any bankruptcy to be removed. No credit repair company can do that. By monitoring your report and taking the right steps to repair your credit, these companies are unnecessary and will only just take your money.
Be Patient
With all good things, it takes time for your credit to be rebuilt. If you are staying within your budget, making on-time payments, keeping your credit card balances low and following the advice outlined above, your credit score should reflect your hard work. As we mentioned, it can take from 7 to 10 years for a bankruptcy to be removed from your credit score. But around three years in, lenders will see that your bankruptcy is older and that can be helpful when trying to secure a loan. It takes a little time and some careful monitoring, but you will see results sooner than you think!
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At Amourgis & Associates, Attorneys at Law, we only represent consumers. We fight for regular people who have been seriously hurt in accidents. We fight for people who are being crushed by overwhelming debt and need a fresh start. We fight for individuals and families. Never businesses. Never insurance companies. We are loyal to the consumer.
