Considering Bankruptcy?

Yes, your credit score can take a hit after filing bankruptcy. But be assured it’s possible to rebuild your credit after bankruptpcy with hard work and responsible spending. And with each positive mark on your report, your credit score begins to rise.

Bankruptcy can stay on your credit for ten years. But realistically speaking, how many things about your life that were relevant ten years ago are still relevant today? The further in time you go away from the bankruptcy, the less relevant your bankruptcy becomes.

There are no new ideas presented in this article. Instead, you’ll get basic principles that have work well over the years. These principles have worked for thousands of others, and they’ll work for you also.

Here’s how you can rebuild your credit after bankruptcy.

Create A Budget

It is important to work out and stick with a realistic budget. If you ever hope to rebuild your credit after bankruptcy, then you must know where your money is being spent.

Keep Up Payments With Non-Bankruptcy Accounts

Debts that survive your bankruptcy normally include auto loans, rent/mortgage payments, student loans, and domestic support obligations.

Start to rebuild your credit after bankruptcy by paying down these balances. This lowers your debt-to-income ratio. You can speed up the progress by paying more that the minimum monthly payments.

This will show new potential lenders that you have the ability to repay your new debts on time. Be aware that your payment history makes up 35% of your FICO score, so making timely payments is one of the best ways to rebuild your credit after bankruptcy and show lenders that you are financially responsible.

Making on-time payments is key to building good credit. Payment history is the most important factor that impacts your credit score. You can stay on top of your payments by:

• Enrolling in autopay at your bank
• Paying off your card multiple times a month
• Sitting reminders to make payments
• Arranging your personal finances to help you pay off the full balance each month.

Have Your Payments Be Reported To The Credit Bureaus

Lenders aren’t obligated to report your payment activity to the credit bureaus, so be sure to inquire if they do. Make sure the lender reports your payment history to all three major credit bureaus: Experian, Equifax and TransUnion.

Open A Savings Account

Set a goal of putting 10% of each paycheck into your savings. It might be wise to open this savings account at a bank that is located away from where you have your regular checking account. That way it can be more difficult for you to withdraw funds from your savings account.

This savings fund can be used for unexpected expenses like auto repairs and doctor bills.

Avoid Job Hopping

Potential lenders want to know you have a reliable income and will be able to repay the loan. Lenders consider your income, job history in the past two years as well as your credit score and other factors. A reliable income and steady job gives the lender confidence that you will repay your loan.

On the other hand, having gaps in income can may you seem more risky to lenders.

Get A Secured Credit Card

A secured credit card is easier to obtain than an unsecured credit card because it requires a cash security deposit. For example, $500 deposit = $500 credit limit. If you make timely payments, you will rebuild your creditworthiness. Eventually, the card company might increase your credit limit or offer you a regular, unsecured card.

Use this secured card prudently. Never go above 30% of the balance limit, and pay off the balance every month. The balance you owe makes up 30% of your FICO Score calculation.

After a year of using the secured credit card you may be ready to apply for a regular, unsecured credit card. But remember the rules. Keep the balance low and pay it off on time every month. Again, don’t use over 30% of your available credit limit. A low credit utilization ration is one indicator to lenders that you’ll repay the loan.

WARNING: Do your homework and shop around for a low or zero fee card. Be sure and read the fine print. Watch out for the interest rates on balances carried over.

Some companies charge exorbitantly high fees for secured cards. I’ve seen cards that charged as high as a $275 users fee for a $500 secured card. That means that the first $275 charge on the card automatically goes to the credit card company. You are only left with $225 for your own personal use. Keep your eyes open and read the fine print.

Also, be sure the card company reports to all three credit reporting agencies. Not all secured card companies do this. Remember that you’re doing this to show the world how well you are performing post-bankruptcy. Your main goal is to rebuild your credit after bankruptcy.

Also, realize that department store and gas cards are typically more consumer friendly than other unsecured cards. Purchase a few tanks of gas, and pay the balance in full each month.

Finally, don’t apply for too many cards at once. Be aware that when you apply for new lines of credit, the lender will do a hard pull on your credit. These inquiries can drag down your credit score. Solution: apply for credit lines you know you can qualify for.

Become An Authorized User On Someone Else’s Card

Perhaps you have a friend or relative who has good credit. If they will add you to their credit card to allow you to become an authorized user on their credit card, it will help boost your credit score significantly.

By being an authorized user you have all the benefits of using that card, but none of the responsibilities for paying it off every month. As long as the cardholder makes on-time payment, your credit score will receive the benefit.

But beware, if the cardholder is late on payments or doesn’t make the payment, the negative report will appear on your credit score. So choose wisely. Make sure to pick a cardholder who is reliable and responsible.

Use A Cosigner

You can have a cosigner on a rental agreement or loan. This will help your chances of getting approved. The cosigner acts as a legal guarantor in case you default on the payments. With a cosigner, you’re approved for credit under your name.

Be Smart About Applying For New Credit

Realize that each new credit application will prompt a hard inquiry on your credit report. Too many hard inquiries over a short period of time can be harmful to your credit score. Lenders view this as risky behavior.

Every time a potential creditor make an inquiry into your credit, your credit score can go down. To combat this, you should call 888-5 OPT OUT (888-567-8688) and follow the voice prompt. Calling this number allows you to opt out of promotional mailing lists sold by the credit bureaus.

Build Your Credit With A Car Loan

A short-term auto loan with affordable payments is a good way to help rebuild your credit score.

Keep A Close Eye On Your Credit Report And Scores

Monitor your three credit reports on a regular basis.

Every year, you are entitled to a free copy of your credit report from Experian, Equifax and TransUnion. Use AnnualCreditReport.com to access each credit report for free. Review them for errors or missing information. If you find any inaccuracies you can report it to the appropriate credit reporting agency.

To find out about what can be reported to the credit bureaus after bankruptcy, Read This >

And, be sure to Read This >

Stay Away From Payday Loans

Enough said. No need to elaborate on this point. The interest rate is egregious and they are setting you up to fail.

Stay Away From Credit Repair Agencies

Many credit repair agencies will claim they can remove a bankruptcy or fix your credit report for a hefty fee. Frankly, there is nothing a credit repair agency can do that you can’t do for yourself. Keep your money in your pocket.

Live Within Your Means

Don’t unnecessarily increase your debt-to-income ratio by purchasing luxury items you DO NOT NEED. Your payment on consumer debt should equal no more than 20% of your expandable income after costs for housing and a vehicle.

Purchasing A Home After Bankruptcy

Just because a bankruptcy can stay on your credit record for ten years, doesn’t mean you’ll have to wait ten years to qualify for a home mortgage. It’s not unusual for people to have rebuilt their credit sufficiently after just two years to where they are in a position to buy a home.

I’m always amazed when people come to me and tell me they don’t think they’ll ever get new credit after bankruptcy. I’m never amazed when they call me two years later to let me know they’ve bought a new home and have fantastic credit scores.

For more information, Read This >

The Bottom Line

Bankruptcy doesn’t erase a bad credit history, but it does give you a second chance. Make full use of this opportunity and demonstrate you have learned your lesson. Your credit score will soon begin to reflect that. You can rebuild your credit after bankru0tcy faster than you think.

Bankruptcy doesn’t have to be the end. You can come back and be successful.

Perhaps you have some questions. You can reach my by phone at 760-523-9090. Or just click on the ORANGE “Contact Me” button at the top of your screen. I’ll contact you back and make arrangements to meet with you.

You’ll be glad you did.

Talk with me. I’ll treat you like a friend.

For more information, Read This >

There are many good reasons to choose Chapter 7 bankruptcy. The U.S. Bankruptcy Code offers several choices to a person who is struggling with debt. A Chapter 7 bankruptcy is the most common form and preferred option for most debtors.

Here are seven reasons to choose Chapter 7 bankruptcy.

1. Time: A Typical Chapter 7 bankruptcy takes about 5 to 6 months from beginning to end. Once the case is filed, a brief creditor’s meeting is held about 35 days into the process. Unless a creditor objects . . . which is very rare . . . the case ends about 3 months later with little excitement.

2. Property: Most Chapter 7 filers do not lose any property. Federal and/or California State exemption laws allow a debtor to protect fairly generous amounts of property. The bankruptcy trustee concludes most cases as being “no asset” cases. This means that you have no property that you are required to forfeit.

3. Cost: A California Chapter 7 bankruptcy is considerably less expensive than a Chapter 13 bankruptcy. While there are differences on what a typical bankruptcy lawyer charges, most experienced lawyers will quote a fee that is fair and affordable. We understand that finances are tight and that this is something you don’t have extra money for.

4. Repayment of most unsecured creditors: There is none. If the debt was incurred in good faith and no creditor objects to you filing bankruptcy, unsecured credit obligations (credit cards, medical bills, utility bills, car repossessions, mortgage foreclosure obligations) are completely wiped out in a Chapter 7 bankruptcy.

5. Privacy: While a record of your bankruptcy is accessible in the court system, unless you are famous, you don’t have to worry about it being published in the newspaper. Generally, the only people who know you filed are you, the court, your creditors, and anyone else you choose to tell.

6. Credit: Most Chapter 7 bankruptcy filers are able to reestablish credit within a short period after their bankruptcy. After the present debt is removed, your debt to income ratio improves. This is the beginning to rebuilding your credit.

7. Stress: Other than a 5 to 10 minute hearing with the assigned trustee for your case, most Chapter 7 filers never have to go to court.

Perhaps you have some questions. You can reach my by phone at 760-523-9090. Or just click on the ORANGE “Contact Me” button at the top of your screen. I’ll contact you back and make arrangements to meet with you.

Talk with me. I’ll treat you like a friend.

 

For more information, Read This >