Rebuilding After Bankruptcy
July 12, 2012
Can you rebuild your credit after bankruptcy?
This is a question most of our clients ask. One of the facts of bankruptcy is that although it initially has a negative impact on your credit, it can actually improve your credit for a very logical reason: After you file a Chapter 7 bankruptcy, your debt-to-income ratio dramatically improves because you have little to no old debt and more money available to pay on new debt.
When rebuilding credit the length and type of your employment can make a difference - the longer you have worked at the same job, the easier it will be to obtain new credit.
However, credit rebuilding steps do not end with your employment history.
First, keep in mind why you filed bankruptcy in the first place. If it came because of a job loss, illness or divorce, you are a good candidate for moving forward and establishing new credit. Whatever the reason, be sure to address the issues that led to filing for bankruptcy.
The next step may be to apply for a secured credit card. With this, you deposit money with a lender as security and your credit limit is usually the amount of the deposit. This is different than a debit card, which has no element of credit lending or credit history rebuilding record.
Also, pay your existing debt, such as installment loans you may still have, on time. This is especially crucial with secured loans such as cars or mortgages. Each month you pay on time, it is reported to the credit bureaus and helps strengthen your score.
After you have a secured credit card, you may want to apply for a store card from a gas company or department store. Using your revolving credit lightly, but regularly can help restore your credit score.
The mix of credit cards, installment loans and store cards used and paid regularly on time can be a fast track to restoring your credit rating after bankruptcy. It can be accomplished in as little as two years in conjunction with a good employment history.
If you are thinking about bankruptcy, we can help. King and King Bankruptcy Attorneys 404-524-6400