Credit Repair after Bankruptcy

The whole concept of bankruptcy can seem out of place in a capitalist country such as ours, let alone the idea of credit repair after bankruptcy. There is a good reason bankruptcy laws came into being – to keep people out of jail and prevent incessant phone calls from aggressive collection agencies. It is to safeguard the event that when you take a financial risk to make an investment or start a business you have some form of protection from your creditors. It is also the opportunity for you to have a fresh start with the possibility of credit rebuilding after bankruptcy.

Before you consider bankruptcy, be certain it will solve your financial dilemma. Why are you in this much debt in the first place? There are ways to improve your FICO score afterwards (see Credit Repair Companies) but if your issue is loose spending habits you have to learn how to use a budget. A good bankruptcy attorney will help you through the legalities.

Bankruptcy Credit Repair

Chances are high your credit score will take an impact from a bankruptcy. If you had a high score before you filed, it will drop dramatically. A low score before filing will not have as far to go down. In any case, you’ll end up with a very low score. Rebuilding your credit after bankruptcy takes effort, but it can be done.

The normal factors that affect your credit score will show up in your report with a new twist after a bankruptcy. For example, your history of paying bills on time will be heavily impacted. Only around half the bankruptcies that happen are declared by people that had prior delinquencies, and this adds to the deterioration of their score. Repairing credit after bankruptcy is affected by your previous bill-paying habits, then and now.

Since you will be forced to close up your accounts, expect the amount of credit available to you to drop to zero dollars. The fact that you are closing so many accounts will influence your score. You will no longer have the benefit of using these accounts to help improve your credit score. After the bankruptcy, when you attempt to open new accounts so you can reestablish your credit, the additional activity in the account will adversely affect your credit report after bankruptcy.

How to Repair Credit after Bankruptcy

Maintaining a previously opened account for a credit card after bankruptcy is one way you can start your bankruptcy repair. Choose one or two of the accounts you have with low balances and reaffirm them. Use them to help with credit repair after bankruptcy. Be diligent about making the payments on time and do your best to pay more than the minimum balance. Remember, the longer it takes for you to pay the principle amount owed, the more interest you pay.

Best Credit Cards after Bankruptcy

One of the best credit cards after a bankruptcy you can obtain is a secured card. This is an account that requires you to make a deposit up front to guarantee the card before you use it. It’s a good do it yourself credit repair strategy to use, since the credit agencies report on it like any other card. After a set period of time the banking institution that granted you the card will release your deposit. Do not make the mistake of thinking your upfront deposit saves you if you miss a payment. Your credit score will be “dinged” instantly.

Credit Repair Loan

Obtaining a loan is another method you can use to repair credit after bankruptcy filing. It may seem strange to apply for a loan after you have essentially stated to the world that your finances are unmanageable, but as was mentioned earlier, America is the land of fresh starts. The best way to rebuild credit after bankruptcy is to apply for credit and use it responsibly. For example, your banker may allow you to open a passbook installment loan. You then borrow against it to prove that you can fulfill your monthly obligations by paying on time.

Although you will have been forced to close down your revolving credit accounts, chances are you will still have secured debt, such as a car loan or a mortgage. Talk to your mortgage lender about the level of interest you are paying. You may be able to refinance your home and get the interest lowered by paying loan points up front. These are tax deductible and paying your mortgage on time is an excellent strategy to handle bankruptcy and credit repair challenges.

My Credit Repair Concerns

When working on credit repair bankruptcy is not an impossible situation. Very quickly after filing for bankruptcy you can begin to apply for credit and begin the process. Establishing new lines of credit is the first stage of fixing your score, even during the credit repair help process. Beware of “loan sharks” that will try to take advantage of your situation. Don’t fall for gimmicks that get you trapped in high interest situations. Deal with it cautiously and use credit repair after bankruptcy to make your credit report shine brighter than ever.