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Everything takes time. Neither does a person become bankrupt overnight, nor does building your credit. Though bankruptcy is an effective way to get rid of a huge amount of debt, it has repercussions too. It can tank your credit score like anything. Since bankruptcy becomes public record, your efforts to get a loan might be extremely difficult for a long time. Chapter 7 and Chapter 13 bankruptcies remain for ten and seven years respectively on your credit reports. This is because the majority of your debts are discharged without paying anything in the former case, while in the latter case, some portion of the debts is repaid through a repayment plan. Lawyers of Los Angeles based bankruptcy law firm Recovery Law Group, say the situation is not permanent and can be reversed with some efforts on your part.
All accounts mentioned in bankruptcy remain on your credit report for a duration of seven years, from the time they were delinquent or bankruptcy filing date. However, it does not mean that you will be stuck with bad credit and unable to get a loan again. Making certain decisions can help rebuild your credit. These include:
• Paying bills on time. Managing your finances is important and the primary step to rebuilding credit. Paying your rent, mortgage or other loans on time can improve your chances of getting credit in the future.
• Create and live as per budget. Bankruptcy involves a compulsory course for financial counseling which helps you to better manage your finances. The primary step involved is- creating a budget, avoiding excessive spending and taking on additional debt.
• Keep making student loan payments. Student debts are not discharged in bankruptcy; hence you should keep making payments towards this debt. Timely payments will help rebuild your credit score.
Qualifying for a new credit card will take time after bankruptcy. Though initially, you might find it difficult, there are ways to improve your chances of getting a standard credit card. One of the best ways is to get a secured card so that you do not indulge in overspending. In case of a secured credit card, the card issuer is given a security deposit which provides a spending limit on the card. Through this, you can easily build your credit after bankruptcy. You can use it every month to pay bills regularly to improve your credit history. Ensure that the secured credit card issuer reports your payments to credit bureaus.
Another way of improving your credit rating is by asking a family or friend with good credit to assist you. You could either ask them to co-sign your loan or credit card or get yourself added as an authorized user for someone else’s credit card. However, this has risks involved as if you default, they will be held responsible for paying back your debts. This can alter your relationships; therefore, you must carefully consider this option before choosing it.
Managing debts is an integral part of rebuilding credit score. Another option for individuals is the credit-builder loan. This involves small sums with repayment expected within a couple of years. The interest rate is generally high (up to 10%). Before choosing this option, find out if the lender reports to credit bureaus.
Having legal assistance is important to get through bankruptcy. Call 888-297-6023 to consult with experienced lawyers.