Repairing Your Credit After Declaring Bankruptcy
Many people try to avoid bankruptcy because they fear it will ruin their credit rating. While it is true that bankruptcy takes an immediate toll, it does not last forever. Your credit report will show your bankruptcy for seven or 10 years but the impact of the bankruptcy lessens over time. And with your debt wiped away, you’ll have a clean slate upon which to start rebuilding your credit.
To revitalize your credit effectively, it is important to practice good financial habits in the months and years following your Chapter 7 or Chapter 13 filing. Here are five helpful steps to take:
- Keep paying remaining debts — You may still have student loans, alimony or other debts that could not be discharged in bankruptcy. Make sure you pay them. Making timely payments helps reestablish your credit.
- Stay current on bills — Pay all your bills on time to avoid going back into a downward financial spiral. Late payments of phone, utility and other bills hurt your credit rating. Paying them on time avoids late fees and prevents the accounts from being sent to collections.
- Apply for and use a secured credit card — Get a credit card with a small credit limit, perhaps $500 or $1,000, that is secured by a bank account. Use your card to buy things and then pay off the entire balance every month. This helps establish a pattern of repayment and shows lenders you are responsible.
- Consider a credit-builder loan — Some credit unions or community banks will allow you to take out a secured loan against money you have in a bank account. Alternatively, they may allow you to make monthly payments into an account and then, at the end of a specific time, receive back the money you paid. In either case, the institution reports your payment history to the credit bureaus, helping establish the all-important pattern of repayment.
- Monitor your credit — Regularly check your credit report to make sure accounts that were discharged in bankruptcy are reported correctly. You can get a free credit report at AnnualCreditReport.com. Through April 2022, you can use the site to check your reports once a week for free.
Taking these steps can help your credit score bounce back after you go through bankruptcy. If you stick to such a regimen, you’ll likely see your score improve in less than a year.
At The Law Offices of Michael Jay Berger in Beverly Hills, I am passionate about helping people get back on solid financial footing after bankruptcy. I will help you pursue debt relief and offer guidance on rebuilding your credit. To arrange a free initial consultation, please call 310-271-6223 or contact me online.