Rebuilding credit after bankruptcy : Bad Credit Advisor

Rebuilding credit after bankruptcy

The effect of bankruptcy filing on your credit report will be devastating. Chapter 7 bankruptcy stays on your credit report for the next 10 years no matter what, so it is imperative to start rebuilding credit after bankruptcy right away. Your credit scores will drop substantially to put it mildly, anywhere from 150 to 250 points and stay there for some time. It will take time and concentrated effort to rebuild credit history, and how long it takes, a lot depends on what credit rebuilding steps and how fast you are to take.

I have seen different cases. Few people managed to get their scores back in mid 600s in just over 28 months after declaring bankruptcy and be well on the way to completely rebuild credit history, while majority had theirs at high 400s or in best case scenario, very low 500s after 3 years. The former had vigorous and straight forward credit rebuilding agenda from the get go, which they pursue on their own, while latter either simply procrastinated or tried to engage in credit repair fraud - some unknowingly, with the dubious help of crooks that brazenly lied, promising to remove bankruptcy from credit report, wasting valuable time, money and creating even more credit related headaches for themselves.

The biggest misconception was and still is the popular notion that you can't get credit for at least 2 years after Chapter 7 bankruptcy. While the cold, hard fact is that you can't get a mortgage for 2 years, and getting a car loan on decent terms is problematic, getting a credit card is quite possible, and is quite important when you consider rebuilding credit after bankruptcy. And while many claim that you must put time and distance from the bankruptcy filing date, some say up to a year, others up to 18 months, you can try to get a secured credit card almost immediately. Once you get one, you can try to get another to continue rebuilding your credit history. And on the flip and brighter side, which you should look at, life after bankruptcy has its perks. For the first time in a long time, you don't owe any money and don't have to deal with debt collectors. More importantly, you probably learned a valuable lesson. Now let's consider steps you must to take in order to rebuild credit after bankruptcy -

1. Open a checking or savings account, possibly in a large bank, it will help you to get an unsecured credit card with this bank down the road when your credit history is getting better.
2. Try to save at least 25% of your paycheck, get a second job if necessary. Now that you have a clean start it should be feasible. Once you have several hundred dollars saved, get a secured credit card, either from the bank you opened account with or any other with decent terms. The most important for you is that credit card issuer reports you to Experian, TransUnion and Equifax - to all three. Here are First Option secured Visa and Citibank secured MasterCard we recently covered, as well as 4 unsecured credit cards for consumers with bad credit. The unsecured credit cards could be still difficult to get at this point, but keep them in mind for a future.
3. Pay every bill you still have, e.g. utility, rent on time.
4. Try to get store and gas company credit cards. Don't apply for more than one in a week at this point. Get a cosigner if you have to.
5. Try to get an inexpensive used car in about 8 months after your Chapter 7 bankruptcy filing. You will need a cosigner of course. If you can pull this one, you will take a giant leap forward in your credit rebuilding adventure, as you will add an installment loan to your credit history. See if some GM or Ford dealers would get you a car loan, considering their situation, they just may.
6. Live a bit below your means for the first 6 months to save as much as possible.
7. Check your credit reports every 4 to 6 months, making sure that all information accurately reported, especially bankruptcy related records and new, post Chapter 7 good records.
8. Try to minimize the number of inquiries on your credit report, once you have established few good credit lines.

Here are 4 things that you shouldn't do -
1. Don't pay your bills automatically from your checking account, unless you are monitoring it online quite diligently. Automatic bill payment can overdraft your checking account and payment can be rejected - thing you can't afford while rebuilding credit history.
2. Don't use payday loans. The fees and interest are too high. It is very easy to get sucked in and again get in trouble.
3. Don't try to erase bankruptcy from your credit report, it is not possible and will only make matters worse.
4. Don't use any outside help, no matter how legitimate it seems or even is. Do it yourself.

Rebuilding credit after bankruptcy means getting new lines of credit and keeping them in perfect standing. It is like getting your spouse trust after you caught cheating. You do it again and it is over for good.

Thu Jan 8, 2009 01:01PM by Tony | More in Credit Repair | Comments (0)

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