Rebuilding Your Credit After Bankruptcy Is Not DIfficult If One Can Follow A Few Simple Rules
Make no mistake, a bankruptcy is a bad mark on a credit score. But I would guess at least half of my bankruptcy clients already have poor scores when they come in. In that case, bankruptcy will actually improve the credit score in short order, because first, instead of for example having $20K in past due or charged off debt, you will now have zero debt, and secondly you cannot file bankruptcy for the next 8 years.
The keys to rebuilding your credit score, and I’m speaking of doing so in about 2 years, are cautiously and responsibly taking on credit and only taking on credit debt you can pay, on time, every month.
Also, importantly, if you have a mortgage or auto loan(s) that you reaffirm while in bankruptcy (meaning you and the lender agree you will keep the car or house and keep up the normal payments), by virtue of making these payments on time you will quickly improve your credit score, even without doing anything else.
After bankruptcy, pay all your bills on time. Once you have done this for a few months map out your monthly budget. It should be of great benefit that you no longer have several credit card or medical debts that you are used to paying each month, if even just minimum payments. Payment history makes up 35% of your credit score so be sure your bills are paid when they are due. On-time payments will will quickly rebuild your credit score. Getting into a routine of paying your bills on time consistently will also help you break some of the bad financial habits that contributed to your bankruptcy in the first place. As stated, now, without the payments towards the debts that have been discharged in bankruptcy, some monies should be freed up.
Get a secured credit card. A bank will allow you to deposit $500 as collateral and then you will have a credit card with a $500 limit. Some credit card companies, like Discover, also have secured cards. As you continue making payments on time, you can then ask the lender to increase your credit limit.
Be wary of any lender that requests a start-up fee. Shop around. Do not open more than one, two at most, accounts.
Be sure to ask if your transactions will be reported to all three major credit bureaus. You want to show that you are paying your debts on time and maintaining a low balance.
Obtain a retail or gas credit card. You may have to wait a couple months to demonstrate you are paying on the secured card or mortgage and auto payments, but another important aspect of your credit score is “types of credit in use”. By using different types of credit, you are affirmatively taking steps that will quickly improve your credit score. How quickly? I have had several clients tell me that within two (2) years of filing bankruptcy, their credit score was back up in the 700s.
I should also mention that there is no law that says because you have filed bankruptcy, you cannot obtain credit. To the contrary, people want your business. I have clients who are solicited for new credit cards before they are even out of bankruptcy!
It just is not that bad. As a Ft. Lauderdale bankruptcy attorney, I help people solve their financial problems and have a life again. That is the intent of the bankruptcy law - to give you a fresh start.
I take your personal financial problems personally. Overwhelmed? I can help.
South Florida Bankruptcy Attorney Steve Glerum. Put 35 years experience to work for you!