Rebuilding Your Credit After Filing For Bankruptcy
Suffering through a period of financial hardship can leave your credit score in tatters. This is especially true if you have had to file for bankruptcy as a result of your financial problems. You may feel as if your credit score is beyond repair. However, you are going to find that it is quite possible to rehabilitate your credit score to where you want it to be.
Rebuilding Your Credit
Make sure that everything was reported correctly on your credit report. You could be feeling the impact of unresolved credit accounts if your creditors do not report them as discharged. Check your credit report for accuracy even if you just opted for a debt settlement. Your creditors may not always tell the credit agencies the same thing they tell you about the status of your account. Incorrect statements on your credit report will only exacerbate your current credit issues. Many times a creditor will not remove the debt from a credit report even though it was discharged in bankruptcy. This is essentially an attempt to collect a debt which is prohibited under bankruptcy laws. They either have to completely remove the debt or say "discharged in bankruptcy." You can obtain an absolutely free credit report, no strings attached, at www.annualcreditreport.com.
Obtain A Credit Card and/or Car Loan
Yes, this sounds crazy, right after bankruptcy to immediately incur new debt. Yet, that is the only way one can improve their credit score. Your credit score is going to take a nose dive after a bankruptcy. Obtaining another credit card will help your credit score in a number of ways. However, that is not the best or quickest way to improve your credit score. Buying a car is. The reason being is that if you obtain a credit card you will most likely only receive a credit amount of $300.00. Even if you use the full amount of credit, your monthly payment will only be approximately $10-$20. This doesn't really do much as anyone can easily make those payments. A car, however, is not only a major investment (most likely thousands of dollars) but the monthly payment will be substantial which in turns shows other credit companies that you are responsible in making a decent monthly payment.
Give The Process Time To Work Out
Repairing your credit score after a bankruptcy may take some time. Your credit score was not exactly ruined by one dumb decision. It would hasty to assume your credit score could be brought back to normal by making a couple of payments on time. Work on other tactics that could increase your credit score such as increasing your income. Having a smaller percentage of your income dedicated to paying off debt can make lenders more likely to loan to you.
Learn From Your Past Mistakes
The main thing to remember is DO NOT OVEREXTEND YOURSELF! This is easy to do and once you start this it becomes a slippery slope back to bankruptcy. It is a good idea to avoid racking up too many new debts so soon after a bankruptcy. Lastly, avoid using your credit cards to make payments on other credit cards/debts. Basically robbing Paul to pay Peter. Eventually this will catch up with you and you may not be able to file for bankruptcy again so soon. The law is that you cannot file a new Chapter 7 case until 8 years after you filed your previous bankruptcy. You can file a Chapter 13 after 4 years, but you will have to pay back 75% of your debt over a 3-5 year period. This payment may not actually help you out as it might be close to what you are paying anyway. Further, your creditors may not be so willing to go for a debt settlement a second time if you try to settle with them on your own. Bottom line, be responsible in having credit to re-establish your credit.