Don’t Stop at Discharge! Rebuild Your Credit After Bankruptcy
Once the bankruptcy discharge is entered and the financial distress is relieved, bankruptcy petitioners are ready to continue on the road to financial health by managing their finances and rebuilding their credit. Many wishing to re-establish their credit wonder where to start and how best to get the task accomplished.
Why you need to rebuild your credit
Building a good credit score after bankruptcy is important because the score is your financial reputation. Right or wrong, credit scores have become important not only for borrowing money, but for employment, qualifying for insurance, travel, and renting or leasing. The challenge is finding a safe way to start rebuilding.
Why you should have a proven rebuilding plan
Even in a credit-tight environment, there are a multitude of lenders who are more than willing to extend credit despite a poor credit score. Debtors who jump at these offers will find themselves back in financial distress if they are not careful. There is no miracle to getting a good credit score but a good score can be achieved within two years after filing a bankruptcy. Care, discipline, and patience is required to do it right. For example, it is not hard to find a lender or used car dealer who will sell a car at 22%-26% interest. But if you need new transportation, call us first. We often have, with no cost to our clients, helped those who need transportation get into a late model or new car with interest rates at 11%-13% or better. If a car is not needed, start by obtaining one or two small, secured credit cards.
While secured credit cards do require a deposit equal to the amount of credit through the card, it is sometimes the best option available and is the initial step in the “fresh start.”
A deposit for a secured card is typically $500-$1,000 for a credit limit of an equal amount, but can be less. We can introduce you to a program including a nationwide financing company that has agreed to approve 100% of our clients who wish to rebuild their credit. This program can also provide you a guide and a plan to clean up errors on your credit report.
If you decide to do it yourself, there are various options to be found online for credit rebuilding. In either case, prepare to see higher interest rates and associated credit card fees than those you may have enjoyed before you filed bankruptcy. For instance, on a $500 credit card, it’s possible to see $200 in credit card fees. If you decide to go this route in order to rebuild your credit score, make sure that the lender is providing up to date information to all three of the credit reporting agencies: Experian, Equifax, and Transunion. This measure is meant to maximize the positive effect you can get from your efforts (and expenses) to rebuild your credit.
Develop Positive Financial Habits to Speed the Rebuild
More important than obtaining your first “credit” post-bankruptcy is handling it appropriately. You must use the credit card once you obtain it, but do not let your balance build. Use it for items or services you will be using or purchasing regardless of how you pay for it, pay it off regularly and NEVER miss a payment. A perfect payment history on a new line of credit post-bankruptcy is the perfect first step towards improving your credit score.
You can manage and overcome bad credit and limited income post-bankruptcy. Don’t let it overwhelm you and don’t think there is no help. It is not an insurmountable obstacle. Be clever and utilize all the resources available to you and even more important, be consistent in your efforts. You’ll be on your way to a higher credit score faster than you expect.
If you need help making a plan to rebuild your credit after filing for bankruptcy, please get in touch with Orrock, Popka, Tucker & Dolen where you’ll find that we can help you with any questions or concerns you have about filing bankruptcy and rebuilding your credit post-bankruptcy.