Filing for Chapter 7 or Chapter 13 bankruptcy doesn’t have to result in the death of your credit score. Our office always provides you with a copy of your credit report before you file for bankruptcy. This credit report includes your credit score. The credit report also provides you with a projected credit score in 12 months, as long as you have healthy interactions with credit. The majority of our clients see a positive increase in their projected credit score on this report. How is it possible to get better credit after bankruptcy?
How Your Credit Score is Determined:
Your credit score rates your interactions with credit. If you have multiple accounts in collections, high balances, and/or late payments that are posting month after month on your credit report, your credit score continues to decline. Filing bankruptcy can help you establish a baseline from which you can start rebuilding. But how do you get started?
After your case is discharged, you’ll want to check your credit report again to make sure that all of your debts have been correctly reported as discharged. If not, you should send a copy of your discharge papers to the credit bureaus to have them update it.
Visit www.annualcreditreport.com to get your credit reports from all 3 credit bureaus – Experian, Equifax, and Transunion. You are entitled to request your credit report for free once every year.
Take Time to Budget
This is also a great time to review and revise your budget. When you prepared your bankruptcy petition in our office, we helped you fill out a monthly budget. You can refer back to that budget in your bankruptcy petition (see Schedules I & J) and update any changes in your income or expenses. You can also find plenty of resources online to start making a monthly budget. The key is sticking to the budget you make! This can help you spend within your means and can also show you how much you could devote to payments for a new line of credit. Also, it’s important to pay your current bills on time to avoid any future negative reporting for delinquent payments.
We’ve collected some budgeting tips for you on our Pinterest page: www.pinterest.com/jamesflexerlaw
Applying for Credit After Bankruptcy Discharge
Finally, you may wish to start applying for new credit. You will want to proceed with caution here! You might receive multiple credit card or loan offers in the mail after bankruptcy. It may be tempting to open multiple accounts to try to rebuild your credit quickly; however, applying for too much credit can hurt your score with each application.
Many experts suggest starting with opening a secured credit card. You can talk to your bank, credit union, or look online. Here is one website that offers up-to-date information about secured credit cards to help inform your decision : http://www.nerdwallet.com/blog/top-credit-cards/nerdwallets-best-secured-credit-cards/
Paying on Student Loans is Key
If you are repaying student loans, setting up student loan repayment arrangements is one of the best ways to re-establish credit. There are programs available based on your income. Visit https://studentaid.ed.gov/ for more information. Keep in mind, student loans are generally not discharged in bankruptcy, so making on-time payments on these loans can really help improve your credit score.
Getting a True Fresh Start After Bankruptcy
Remember, your credit score is not doomed after bankruptcy. You were courageous enough to clean up your financial past through bankruptcy and you now have the ability to control your financial future. By being diligent to check your credit report for accuracy, make and stick to a budget, and apply for credit with caution and intelligence, you can move toward achieving your goals: creating a savings account, planning for retirement, or even buying a home.
Our staff here at Flexer Law is devoted to helping you getting a fresh start through bankruptcy so you can have a brighter financial future! If you have already been discharged from bankruptcy, we hope that you will stay in touch and let us know how you’re doing. If you have a post-bankruptcy success story, please contact us – we would love to hear from you!