You Can Build Your Credit Back Up After Filing Bankruptcy

Many are left wondering where to go after filing bankruptcy. Helplessly feeling like their credit has tanked and is irrevocably damaged keeps them from proactively trying to rebuild. The truth of the matter is that, while your credit will reflect the wreckage of your past, there is much you can do now to work toward a brighter financial future. At RGG Law, our bankruptcy lawyers will be by your side, not just through the process of filing bankruptcy, but we also want to help you rebuild; we’ve included a few tips for rebuilding your credit.

Assess Your Credit Card Situation

If you have an existing credit card, you might want to avoid applying for a new one. Credit inquiries, which will be run when you apply for a credit card, account for 10 percent of your credit score. This means that every time a potential creditor runs your information to check your financial history, it looks like you’re desperate for more credit and your credit might take a hit.

Another similar percentage that your credit is affected by is the length of your credit history. When you open new lines of credit, you drag down the average of your credit history length.

Unsecured Loan or Credit Card

Another great way to build credit is through secured loans or credit cards. Both require a deposit up front; the loan or credit limit is usually 50 to 100 percent of the amount of that deposit. This removes the bank’s risk of loss and allows you to build your credit.

The good news is, many banks, after several months or a year of on-time payments, will allow you to convert your secured card to a regular credit card. However, not all banks will report to all three credit-reporting agencies; make sure that the bank you’re applying for the secured loan or credit card reports to all three so that your credit builds.

Unsecured loans may have high-interest rates, and possibly high activation fees for secured credit cards, but if you make your payments responsibly, you’ll begin to see a difference in your credit score.

Ask for a Cosigner

Cosigning is a big display of trust in you. You’re asking someone with good credit to vouch for you, at the risk of assuming your debt if you don’t pay it. This reduces the risk of the creditor and allows you to get a line of credit. This will build your credit score over time. Make sure to make payments on time and handle your credit responsibly, as this will reflect on not only your credit but the credit of your cosigner.

A Chapter 7 bankruptcy will remain on your record for 10 years, while a Chapter 13 bankruptcy will disappear after 7 years (this is because a Chapter 13 bankruptcy requires you to repay your debts, where a Chapter 7 does not). If you spend that time rebuilding your credit, you can come out of that period of time with a fantastic credit history. Don’t let discouragement from your past keep you from building a better financial future.

Contact a Lawyer at RGG Law Before Filing Bankruptcy

Bankruptcy law can be complicated. If you’re thinking about filing bankruptcy, contact a lawyer at RGG Law. We have experience and expertise helping you through the process of filing bankruptcy. Contact us today for a free consultation and to see if filing bankruptcy is right for you.