After declaring bankruptcy, your credit score will be seeing new lows. Some people find this extremely discouraging. It can easily be taken negatively, but when weighed against the benefits offered by filing, there’s no comparison. The best approach is to know before you file that you are going to immediately start rebuilding your credit once you receive your discharge.
After you receive your discharge is the perfect time to start rebuilding your credit. You could buy a new car utilizing an auto loan. You can obtain a new credit card. Regardless of your method, something must be done because we live in a credit society and post-bankruptcy, you won’t have access to a lot of credit. If you’d like to change that to increase your options in the future, you simply have to know a few tricks to rebuilding your credit.
You should have 3 lines of credit. It can be a combination of: installment loans (i.e. auto loan), unsecured revolving debt (i.e. MasterCard, Visa, Discover) and secured credit cards (cards that are offered for use as “credit” only after you provide a deposit equaling the amount of the credit limit).
When trying to rebuild your credit try to keep your balances at or below the 30% mark. When you go over 30% of your credit limit, it is counted against you. Using your credit card and paying it off immediately also counts against you. In order to rebuild your credit, the reporting agencies are looking for a great payment history. In order to give it to them you’ll need to use your card and leave a balance on the account long enough for them to ask you for a payment before you pay it off.
If you are able to obtain a secured card from a reputable source, it can be a great asset in your attempts to rebuild you credit. Use it to purchase groceries. Then at the end of each month, pay it off. Doing so will build a positive payment history as long as you’re working with a reputable secured card source.
Successfully maintaining positive payment history on three lines of credit for two years after your discharge date will often result in a credit score that is back in the 700s.
If you have additional questions about repairing your credit after filing for bankruptcy or what you can do now to prepare to rebuild once you receive your discharge, contact Westgate Law.