Whether you filed bankruptcy already, or are contemplating filing, you can cease the opportunity for a do over. In this day and age it can make life easier to have credit cards or be credit worthy to apply for loans to buy a home or car. Therefore, re-establishing good credit is important and rebuilding your credit after a bankruptcy is something that can be certainly accomplished.
Establishing Good Financial Habits
- Review your credit report(s); know exactly where you stand and how far you need to go to get the credit score you want. There are 3 major credit bureaus (Equifax, Experian, and TransUnion).
- Dispute any incorrect information listed on your credit report(s). There may also be inconsistent info reported by the different bureaus, i.e. debts that are paid in full may be listed as unpaid, or is incorrect payment history.
- Proceed cautiously and responsibly, when taking on credit again. Good financial habits will enable you to obtain credit again, and more importantly, when necessary, get better rates.
- Pay bills on time. Meet all credit obligations when they are due. This will go a long way to re-establishing credit.
- Consider credit counseling. The National Foundation for Credit Counseling may offer no or low-cost help or ask your attorney to make suggestions.
- Create a budget. Determine how much income comes in and your expenses to be paid out for every month; make a strict plan.
- Start a savings plan. A good place to start is by reducing your non-essential expenditures, use that money for savings.
- Open a checking and savings account, if you don’t already have them. Compare the interest rates, fees and services of all financial institutions conveniently situated between your home and work.
Applying For Credit
- Secured credit cards. Unlike a debit card that directly draws money from your bank account, a credit card allows you to borrow money and pay it over time. With a secured credit card you give the bank money (for example $500), and then the bank gives you credit in that amount.
- Avoid finance companies; they often have high interest rates.
As your credit improves
- Ask the bank to slowly start raising the limit and ask if your transactions are reported to the 3 major credit bureaus, as you want them to see that you’re paying off your debts so your score can begin to improve.
- Apply for a retail store or gas credit card; particularly one you won’t be tempted to spend too much money. This is important to improving credit, using different types of credit improves your credit score.
- Don’t apply for too much new credit. Part of rebuilding your credit after bankruptcy means learning new money habits.
- Pay off balances in full each month, credit bureaus want to see that you’re capable of paying off the balance; 35% of your credit score is payment history.
- Avoid closing accounts in this phase, it will work against your credit score and potential for credit line increases. If temptation is too great to use the card, instead just cut up the card.
- After 12 months, consider asking your bank to switch your secured card to an unsecured card.
- Choose 1 bank to do most of your business with checking, savings, and credit card to become a member in good standing for better account perks later on.
Remember, you’re not alone, a lot of people have traveled this same path as you; you can turn it all around. For experienced bankruptcy attorneys providing the best advice and representation, contact Feldman Law Offices to schedule a consultation 610-530-9285. Let us help you!
Please note: The hiring of an attorney is an important decision that should not be based solely on advertisements. Further, prior results do not guarantee a similar outcome. The laws change. Each case is different. This blog and website is designed for general information only. The information presented on this site is neither formal legal advice nor the formation of a lawyer/client relationship.