Your Credit After Bankruptcy
With effort, your credit can quickly return to normal after bankruptcy.
If you are struggling with debt, you may have considered bankruptcy as a means to get out of the fix that you are in, but are discouraged from doing so after hearing horror stories about how filing it can ruin your credit. However, these stories are largely overblown. Although filing bankruptcy has a temporary negative effect on your credit, you can rebuild your credit in as little as two years, if you take certain steps.
Check Your Credit Score
Let’s face it, your credit score (or credit rating) is a very important number. Lenders use this number when deciding whether to approve your application for a loan or mortgage. Additionally, employers are increasingly checking credit scores when making hiring decisions. Due to its importance, it is vital for you to ensure that the credit reporting bureaus have accurate information when calculating your score.
As a result, it is important to request a copy of your credit report from the three principal credit reporting bureaus (Transunion, Equifax and Experian) as soon as possible after your bankruptcy has been completed. Check each report to ensure that your debts prior to bankruptcy are listed as discharged. As any inaccuracy can lower your credit score, if there are any errors, contact the bureau and have them corrected.
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Timely Pay Your Bills
Needless to say, having a record reflecting prompt payment of your bills can significantly help your credit score. In fact, up to 35 percent of your score is determined by your bill payment history. Because of this, make sure that your day-to-day bills, such as rent, mortgage and utilities are paid in full on time. Aside from raising your credit score, prompt payment of bills can help you qualify for a loan or mortgage, as lenders often want to see evidence of a responsible payment history.
Use Secured Credit Cards
Once you have completed bankruptcy, you may receive several offers from credit card companies. However, the majority of the credit cards offered to you will likely carry high interest and fees, which can quickly put you back on the road to insolvency.
Instead of traditional credit cards, it is generally better to apply for a secured credit card. This kind of credit card requires you to make a deposit with the issuer, the amount of which sets your credit limit. In the event that you are unable to pay your credit card charges, the issuer can apply the deposit to your balance.
Before obtaining a secured credit card, ensure that the issuer reports your payment history to the three major credit reporting bureaus, or having the card will not affect your credit score. Over time, assuming that you pay off the balance in full each month, your credit score will gradually increase. Eventually, you will once again qualify for low-interest traditional credit cards.
Speak With an Attorney
Although bankruptcy can negatively affect your credit, the effect is short lived. In reality, most people that file bankruptcy find that their credit score is soon better than it would have been if they had done nothing. If you are drowning in debt, contact an experienced bankruptcy attorney. An attorney can address your concerns and recommend the best debt relief option for your situation.