As I discussed on Monday, many of my clients express tremendous concern about how and when they will be able to rebuild their credit. While a Chapter 7 or Chapter 13 bankruptcy may immediately send your credit score downward by as much as 200 points, I have also seen clients reach a score in the 700s after going a year with no late payments or collections. Generally, there are three major steps that can make this happen:
- Make all payments on time — If you are serious about repairing your credit score, then this step is a must. You would be wise to prioritize your monthly payments, making sure that payments for a home, car or any other secured loan are always paid first. Any and all payments that are reported to the credit bureau are ones that you absolutely must make sure to have paid on time, every time.
- Keep up on your credit report — You will want to pull your credit report as soon as your bankruptcy case has been discharged. If there are any items that are continuing to be reported negatively after your discharge, you will want to dispute that information. Also, remember that you are entitled to one free credit report at AnnualCreditReport.com from each of the three nationwide credit reporting companies—Experian, Equifax and TransUnion—every 12 months. AnnualCreditReport.com is the only website authorized by the Federal Trade Commission (FTC), and you should avoid television and internet advertisements for “free” credit reports.
- Apply for a secured credit card — This often sounds nonsensical to clients who, in many cases, entered my office largely because of credit card debt that had spiraled out of control. As I have touched on before, your mailbox will essentially fill up with offers from banks and lenders for credit cards. However, the credit card that you pick and how you manage it will go a long way toward determining how quickly your credit score will improve. A secured card works like a prepaid credit card in the sense that you deposit money in your account and use the card like a debit card. Using credit wisely is what builds good credit.
The effort to rebuild your credit will require you taking out more credit, and this can be an especially risky proposition for many of my clients. On Friday, I will talk more about the steps my clients took to be more responsible with their new credit following a Chapter 7 or Chapter 13 bankruptcy discharge.
Law Firm of Kevin D. Judd – Washington DC bankruptcy lawyer