Credit Rebuilding
Rebuilding Your Credit
Getting buried under credit card debt or missed mortgage payments can make it feel like building your credit is impossible. However you do have options, if you fall too far behind on your payments, filing for bankruptcy is one of them.
Building your credit after bankruptcy
Bankruptcy is not the end
While it’s true that filing for bankruptcy will negatively impact your credit score initially, if you are incredibly far behind on making a number of payments it can be great first step towards rebuilding your credit.
Filing bankruptcy may actually improve your credit scores because all or most of the unsecured debt will be eliminated. However, you must keep in mind that discharging debts again in bankruptcy will not be possible for many years. Either way, it is a very good idea to start rebuilding your credit score immediately after filing bankruptcy.
Rebuilding your credit score demonstrates that you can handle credit responsibly, that you can repay your debts on time, and that the events that led to your bankruptcy are unlikely to repeat.
Check Your Credit Reports
Once you have filed for bankruptcy, get a copy of your credit report from each credit reporting agency. Since creditors do not always report to all 3 agencies, credit reports may vary. You can get one free credit report every year from each agency from a handful of websites. You should review the three credit reports for incorrect information, such as discharged debts that have not been removed or accounts that are listed on the credit reports that are not yours. Generally the agencies are good about removing inaccurate information but mistakes can happen. Your bankruptcy attorney can help with removing credit report errors.
Credit Education
In order to stay ahead of your credit, one of the most beneficial things you can do for yourself is educate yourself about how credit works to give yourself an advantage when rebuilding your credit. This can include learning how to better mange your credit card payments, using secured credit cards, or utilizing credit rebuilding programs.
Get New Lines of Credit
Apply for a secured credit card as soon as possible following bankruptcy. These cards require you to fund a bank account up to a matching credit limit. If you fail to pay your secured credit card balance, the bank will take payment from your bank account. By depositing funds equal to your credit limit, a secured credit card will be issued despite your poor credit history.
Make small purchases with you card regularly and pay down the entire balance every month. Never max out your secured credit card limit. Ideally, use less than 40% of the available credit limit.
After approximately a year of timely payments on your secured credit card, your deposit to the bank will be returned, and you will have an unsecured credit card.
The more different types of credit accounts you have, the higher your credit score will be. So, while opening multiple secured credit cards will boost your credit score, opening one secured credit card, and then opening an unsecured credit card, will boost your credit score further.
Like your secured credit card, you should pay all unsecured credit card balances off in full every month and don’t use more than 40% of your credit limit. Be careful when applying for unsecured credit cards. Each time you submit a credit application, a “hard inquiry” is generated. Too many hard inquiries will decrease your credit score, because you appear to be a greater credit risk.
Car Loans
Another way to increase your credit score is to buy a used car with a loan from your local bank or credit union. They will report your payment history to credit reporting agencies. Avoid buying from a used car dealership that does not report payment history. It is also important to make sure you can easily afford the monthly payments.
Don't close your accounts!
One common mistake is closing credit accounts. Your credit score is, in part, based on your total available credit. Getting new trade lines increases your available credit. As you charge purchases, your available credit decreases, but paying off the monthly balances restores the available credit. However, by closing trade lines, you decrease your available credit and your credit score. It is better to make small purchases on credit accounts than to close them down.
Making timely, or faster than required, payments on three or four different types of trade lines that have been open for 12 to 24 months following your bankruptcy discharge demonstrates to potential lenders that you can responsibly handle debt and that your bankruptcy was attributable to circumstances beyond your control.
Get in Touch With a Bankruptcy Attorney to Help Rebuild Your Credit.
If you’re struggling with bankruptcy and are looking for a way to rebuild your credit, our team of experienced bankruptcy attorneys is here to help. We understand the challenges that come with financial difficulties and the impact they can have on your credit score. With our comprehensive credit rebuilding services, we can help you take the necessary steps to improve your credit and get back on the path to financial stability. Don’t wait any longer to take control of your financial future. Contact us today to schedule a consultation and learn how we can help you rebuild your credit and achieve your financial goals.
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