A top question I am asked by clients is how to reestablish credit after bankruptcy. This is a very important topic. Here are my recommendations.
Bankruptcy will stay on your credit report for seven to ten years after filing. This is a long time, but it does not mean that you can’t rebuild your credit during that time. In fact, I advise most people that the most difficult period of time is during the first two years after filing.
Even with bankruptcy on your credit report, you can reestablish a good credit history. I strongly recommend that people begin this process as soon as their bankruptcy case is over. Waiting does not do you any good.
Get A Credit Card
Most of my clients report receiving unsolicited credit card and loan offers in the mail once their bankruptcy cases are discharged. Be wary of these offers. Most will have very high interest and fees.
Part of reestablishing your credit is making good credit decisions. Don’t just take any offer that is thrown your way. Being a savvy consumer will help you stay out of financial trouble in the future.
Secured Credit Cards Are A Great Start
The best way to avoid predatory lenders is go to your current financial institution. Most have products to reestablish or rebuild credit. Be honest with the banker and they will likely have something for you.
In general, a secured credit card through your current bank will probably be the easiest product to get. Because the card is secured by a cash deposit, the fees and interest will likely be reasonable too.
Once You Have A Credit Card, Use It Responsibly
One of the largest factors that go into a credit score is your history of payments. Make sure that you pay your new credit accounts on time each and every month. Even one late-pay can severely impact months and months of good credit history. If you do nothing else, just make sure that you pay your bills on time each month.
You will be surprised how easy it is to increase your credit score after bankruptcy. Make sure to accept only good credit terms, and pay your bills on time.
Please call my office at (916) 333-2222 to discuss how bankruptcy can help you reorganize your finances and get you a fresh start in Sacramento.
