After bankruptcy, you want to fix your financial situation as quickly as possible. Bankruptcy can remain on your record for up to 10 years and may cause your FICO credit score to go down into the 400’s. Still, there are steps you can take to rebuild your credit and increase your FICO score, and if you can get it to 650 or above, you will probably be eligible to apply for credit for vital purchases. The experienced bankruptcy attorneys at Fesenmyer Cousino Weinzimmer can help you find practical ways to improve your credit and get on a better financial path.
Here are some steps you can take to improve your credit after bankruptcy:
- Know Where You Stand — After bankruptcy, you may actually be in a better position to get credit because you reduce your debt-to-income ratio. Also, because you won’t be able to file Chapter 7 again for another eight years, or be eligible for a discharge in a Chapter 13 bankruptcy for two to six years, you may appear to be a better risk.
- Know Your Credit Score — You can check it for free at myBankrate or com’s free Credit Report Card, and you can request one free copy of your credit report per year from Equifax, Experian and TransUnion at AnnualCreditReport.com. Examine your credit reports and make sure there are no errors or inconsistencies and report any you find.
- Pay Bills on Time — Get into the habit of paying bills as soon as they come in instead of putting them aside and possibly forgetting. Set up automatic payments whenever possible to pay bills every month by the due date.
- Show Stability — Hold on to your job, and don’t change residences if possible.
- Slowly Apply for Credit — Don’t borrow money too quickly, but build credit by getting a major credit card account. If you don’t have credit accounts that remain open after bankruptcy but need to establish new accounts, it may be easiest to start with a secured card. You can do this by depositing money into a secured account at a bank, which will then give you a credit card with a credit line that’s 50% to 100% of the deposit. This gives you a way to rebuild, and once you have a positive use record, you may be eligible for a traditional card.
- Pay Off Your Bills In Full Each Month — You don’t have to carry balances on your credit cards to build good credit, and you will avoid paying high interest fees. Make it a policy not to charge anything if you can’t pay it off immediately.
- Consider Taking a Loan — A few years after bankruptcy, you might be able to get a car loan or line of credit. Make sure it’s for something affordable and that you can pay it off successfully. Often, you pay a higher interest rate to start, but your next interest rate on a loan will likely be lower. You may be eligible for a home loan as early as one to two years after bankruptcy. The Federal Housing Administration (FHA) and Department of Veteran Affairs (VA) have specific guidelines for accepting borrowers who have filed for bankruptcy.
- Keep Credit Cards Open — Closing accounts reduces the amount of credit you have available to you and leads to lower credit scores. Keep the cards, but don’t use them or cut them up if you’re tempted to spend too much or can’t pay your balances off immediately.
- Don’t Use Credit Repair Services — Credit repair services and payday loans often charge exorbitant fees. You’re better off rebuilding your credit on your own.
- Save Some Money — Even if it’s difficult, try to put aside some money each month for emergencies so you don’t get sucked into scams, wind up overpaying interest and get into debt again.
- Credit Counseling and Debtor Education — Take advantage of legitimate credit counseling resources that can help you learn about and develop good credit practices. The US Trustee Program Web page provides a list of debtor education resources.
- Be Patient — Raising your credit score requires patience. Your bankruptcy took time to develop, and so will improving your credit.
Remember, bankruptcy issues are complicated, but Fesenmyer Cousino Weinzimmer attorneys understand the issues and the difficult decisions involved in taking this step and rebuilding your credit. We will work with you to make sure you understand your options and help you decide on solutions that make sense in your individual case.
Call Fesenmyer Cousino Weinzimmer at one of our office branches at 614-228-4435 (Columbus), 937-222-7472 (Dayton), or 877-654-5297 (Cincinnati) for a free consultation so we can determine what debt relief solutions will work best for you.