• Rebuilding Your Credit

    Rebuilding your credit after bankruptcy is probably the most important task for clients. Most clients rebuild to a good score in about 12 months coming out of their case.

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Rebuilding Credit After Bankruptcy

Believe it or not, bankruptcy is a great tool for rebuilding credit.

Rebuilding credit is important to anyone who has recently filed bankruptcy. This is the #1 questions that clients have for us when we review financial options.

You may have gone through a long period of time where your finances were up and down and has a result your credit is very “bruised”, however now have a second chance to get your credit back. After bankruptcy, rebuilding credit is possible with careful attention to your finances.

We have worked with many clients who are trying to get back on track after bankruptcy. Call us today to learn more about how we can help you.

Understanding How Bankruptcy Affects Your Credit

If you are considering bankruptcy you may be concerned about how low your credit will go if you file. In actuality, the damage that bankruptcy will have on your credit score really depends on how your credit was prior to filing.

If you have many accounts that are delinquent with late payments and your debt-to-asset ratio is high prior to bankruptcy, then your score is likely already low. Filing bankruptcy will eliminate late payments and reduce your debt-to-asset ratio. Thus, although the bankruptcy will negatively impact your score, it will also have some positive impact. Your score may not drop as low as you think it will after bankruptcy.

However, if you have very few late payments and simply don’t feel like you can keep making those payments, then your credit score may take a bigger hit. It’s best to consult with a bankruptcy attorney before filing bankruptcy so that you can understand your options and how bankruptcy will impact you specifically.

Our office can provide clients with their current credit score and a 12 month estimate as to how their credit will rebound after bankruptcy.

Bankruptcy Can Improve Your Credit

Bankruptcy will give you relief that can help you with rebuilding credit over time. A Chapter 13 bankruptcy will be on your credit report for seven years and a Chapter 7 bankruptcy will be on it for 10 years. Although the bankruptcy will appear on your credit report for several years, it will reduce the impact of other negative aspects of your credit quickly.

Bankruptcy will reduce your overall debt ratio and remove the negative impact of late payments and many other credit killers. So, while a bankruptcy itself will also negatively impact your credit, the impact of all the other negative pieces that could be fixed by bankruptcy may be much greater.

Does Bankruptcy Negatively Affect Your Credit?

Temporarily your credit will take a hit when you file.  However it is important to remember that the effects of your bankruptcy do not have to be permanent. If you take the right steps to rebuild your credit after bankruptcy, it will not be long before your credit score bounces back.

There are many ways to rebuild your credit after bankruptcy, including:

  • Check your credit report annually and dispute errors
  • If you don’t qualify for a credit card, apply for a secured card
  • Create a monthly budget, and pay all of your bills on time
  • Avoid utilizing a large amount of your available credit

#1: Review Your Credit Report Annually

Once you have completed the bankruptcy process, it is important to know exactly where you stand. Start by requesting a copy of your credit report from all of the major bureaus, such as Equifax, Experian and TransUnion. You are entitled to one free copy of your credit report each year. If you notice that any of these reports contain inaccurate or inconsistent information about your debt or payment history, you can and should dispute it.

#2: Start Using a Secured Credit Card

One of the most effective ways to rebuild your credit after bankruptcy is to start using a secured card—since you may not qualify for a traditional credit card. With a secured credit card, you would deposit money into a savings account and use this deposit to secure a line of credit. Your credit limit would then be the amount of the deposit, minus any fees. It is important to choose a card that reports to all three credit bureaus.

#3: Make All of Your Payments On Time

After filing for bankruptcy, it is imperative that you start paying your bills on time. Payment history makes up 35% of your credit score, so making on-time payments is one of the easiest ways to rebuild your credit. If you have a tendency to fall behind on your bills, you should create a monthly budget and stick to it. Now is the time to break bad financial habits. Sticking to a budget will also help you build up your savings. Request a free consultation with the Dallas Bankruptcy lawyers at our firm to find out more.

#4: Pay Off Your Balance Every Month

You may have heard that carrying a balance is good for your credit score, but that’s not necessarily true. If your credit score was damaged when you filed for bankruptcy, credit bureaus want to see that you are capable of repaying your debts. For this reason, you should get in the habit of only spending what you are able to repay at the end of the month. Paying off your balance each month is a good way to break the debt cycle.

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We invite you to contact us either online or by phone at 404-919-7296 to schedule a free confidential consultation to review your personal financial situation and what options we can provide to protect you from creditors. For additional information about bankruptcy please also check out our YouTube Channel which has up to date vlogs on issues related to personal bankruptcy.

© 2024 Saedi Law Group LLC. All Rights Reserved. LEGAL DISCLAIMER: We are a debt relief agency. We help people obtain relief from their creditors by filing for bankruptcy. Nothing posted on this website shall constitute legal advice. If you need legal advice please contact our office to schedule an appointment. No attorney client relationship exists until we have a written contract.