We at Crawley Law Firm not only want to help you get out of debt by offering a free consultation to see if bankruptcy is an option for you, but also want to help you recover from it.
Filing bankruptcy is an opportunity to start fresh financially and we offer 14-week credit rebuilding program called “7 Steps to a 720.”
This program teaches you how to improve your credit rating over a 6-12 month period of time.
You learn things like:
- How to rebuild your credit the right way
- Why most credit scores are wrong
- Which credit cards actually hurt your credit score
- How to stop lenders that report the wrong information
- How to re-establish your credit after a bankruptcy, foreclosure or short sale
To find out more about this program, fill out the “Contact” form or call us at 870.972.1150.
Rebuilding Credit After Bankruptcy
Once you’ve reached the end of your bankruptcy and your debts have been discharged, you’re usually in a much better financial position then when you started. Your credit score, however, has taken a hit. The task of rebuilding credit can seem insurmountable, but there are steps you can take immediately after bankruptcy to begin the recovery process.
Impact of Bankruptcy on Credit
First, you need to understand what effect bankruptcy has on your credit score and ability to obtain loans in the future. Bankruptcy stays on your credit history for 10 years, so anyone considering you for a loan will see it. This gives them pause, of course, but it isn’t all bad. After Chapter 7, you are ineligable to file for another Chapter 7 bankruptcy for eight years. This may make you a more attractive candidate for some loans. The bankruptcy process for individuals also requires classes in financial responsibility. Banks know that and it may influence their decision about whether you’ll be a trustworthy debtor.
Assessing the Damage
The first step to rebuilding is to look at all of your credit reports and make sure there are no errors. Since you’re coming out of bankruptcy, some of the negatives on the report will be correct, but others may not be. Be sure to call the credit reporting agencies and get any mistakes cleared away. After that, create a realistic budget. You’ll need at least some savings to buffer against emergencies. It is important to have a cushion so that loans don’t spiral out of control again.
Rebuilding Your Credit
Now that you have a clear idea of what your financial situation looks like, you can seek out loans that will raise your credit score. Starting small and making sure that payments are made completely and promptly will be important at this stage, so be sure your budget is accurate and your commitment to rebuilding your credit is strong.
Secured Credit Cards
These are credit cards that are secured by a deposit in the bank that issues them. As soon as your debt is discharged, you can apply for one. The amount of credit is usually between 50% and 100% of the amount of the deposit.
Similarly, a secured loan is a loan made with cash as collateral. Either money that you’ve already deposited or money from the loan itself can serve as the security on the loan. Until payments are made, you won’t have access to this money, but the bank will report your payments to credit rating agencies which will build your score.
Depending on several factors, you may not be able to get the above loans right away. If there is someone with good credit who trusts your ability to repay, you may be able to get a loan with their signature vouching for you. They will also be liable for the amount of the loan, so make sure you’re able to repay it.
Authorized User Status
Some secondary users on certain credit cards also have the payments reported to credit agencies. Not every card will do this, so if you choose this option make sure to ask whether this is the case.
Finally, and most importantly, don’t get overwhelmed and don’t give up. Bankruptcy can feel like a big stain on your credit report, but it doesn’t have to. People overcome it every day and with care and strategy, you can too.