Your Credit after Bankruptcy: Filing Will Hurt it, but it Won’t Kill It
It’s interesting how the word credit changes when we put the word “your” in front of it. Credit is funding offered up front that is expected to be repaid at a later date, usually with an agreed upon payment plan. But when we alter it to the phrase “your credit” it’s a new game altogether. Your credit is important. It is used by people who don’t know you to determine whether or not they can trust your follow through on financial agreements. Credit can play a role in establishing “your credit,” but it goes further than that. It’s a record of money you’ve borrowed, your record of paying it back (or payment history), how much credit you have that you aren’t currently using, public records, records of collections accounts, how often you ask for additional credit, etc. Your credit is used, for the most part, to determine if you are a trustworthy loan candidate. Banks don’t know you well enough to make this decision based on your actual character so they turn to your credit report.
When you file bankruptcy, it is listed on your credit report. Many believe that taking action to solve an impossible financial situation by filing for bankruptcy will permanently ruin your credit. This isn’t true. Bankruptcy will hurt your credit, but it won’t kill it. Your credit after bankruptcy will be damaged, but you simply have to take action to repair it. You’ll be surprised to see how quickly you start getting credit card offers in the mail again. Most bankruptcy filers start off with a secured card (which require a deposit to the “lending” bank equal to the amount of “credit” offered) will begin to arrive within a month of receiving your debt discharge. Pick a good secured card, set it up, and use it to start showing regular, on time payments that will be reported to the credit reporting agencies and then reflected on your credit report. It’s a great way to start rebuilding you credit.
After about 6-12 months of using a secured card with regular, on time payments, you can usually get a regular credit card. At that point you can drop the secured card. But remember to keep making on time payments to your credit card. Your credit is a continuous work in progress and requires constant good payment behavior on your part if you want to see an improvement in your overall credit score.
Once you receive your discharge in the mail, check your credit report to make sure that everything that was discharged is actually marked as such on your credit report.
If you’d like to discuss helpful methods of repairing your credit after filing for bankruptcy, get in touch with an expert on the topic at Westgate Law, our southern California bankruptcy attorneys have experience in navigating California bankruptcy law and can help you make the most of the fresh start bankruptcy provides.