Wednesday, May 18, 2005

Rebuilding Credit After Bankruptcy

Many consumers are finding it easier to reestablish credit after filing for bankruptcy. After receiving a discharge, most debtors will begin receiving advertisements from lenders offering to finance homes, vehicles and credit cards. The most important way to reestablish your credit is to stick to a budget so that you do not get into a financial bind again. Here are some additional tips:

1. Consider opening a checking and savings account. Some lenders look at this to determine if you can responsibly handle money. Being able to pay bills from a checking account is also much more convenient than paying with money orders.

2. Consider applying for applying for store and gas credit cards for purchases for which you would normally pay cash. These cards usually have small limits and can help you restore you credit, but only if you have the discipline to set aside the money to pay the bill each month.

3. Consider applying for a secured card where you deposit cash and charge against it. If you borrow money for short periods of time and pay it back, this will reflect positively on your credit report.

4. You MUST pay your utility bills and rent on time for at least a year.

5. If possible, find a friend or relative to cosign for you on a loan and pay it on time.

6. Look for car dealers and mortgage brokers that attest to being "bankruptcy friendly". Buy a used car on credit so you do not get hit with the depreciation that occurs during the first two years of a new car purchase.

7. Stay away from payday loans that are at high interest rates and are a bad credit trap.

8. Write a letter to each credit reporting agency explaining the circumstances that lead to your bankruptcy filing.

9. Live within your means. Do not unnecessarily increase your debt-to-income ratio by taking on credit to purchase luxury items that you DO NOT NEED. Your payments on consumer debt should equal no more than 20% of your expendable income after costs for housing and a vehicle.

10. Pay your reaffirmed, pre-bankruptcy debts on time.

We are a bankruptcy and debt relief agency. We help people file for bankruptcy.

About the Author: Carl H. Starrett II has been a licensed attorney since 1993 and is a member in good standing with the California State Bar and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.

4 comments:

Steve said...

It'll be interesting to see how new Federal Bankruptcy laws will affect the poor people out there who have to file...

Carl Starrett said...

I covered that issue in a previously article:

http://www.chs-law.com/2005/04/bankruptcy-reform-signed-into-law.html

I think the REALLY poor won't be impacted at all.

Abraham said...

I have a relative who has filed for bankruptcy 4 separate times. She and her husband are now in their 80's and the US Government and the State pay for everything -- from medicines to doctor's visits and from food to the rent on their apartment. They haven't spent a cent of their own money for over 50 years. They learned how the system works and have worked it to death.

kelvin said...

There’s a myth about bankruptcy that makes people think that, after they file bankruptcy, they won’t be able to get approved for any credit loans until that bankruptcy clears in seven years. This is not true. In fact, some people who have filed bankruptcy hold some of the highest credit scores even before the end of their seven year period. Their secret, they paid their bills on time, month after month, year after year. They built their credit slowly, making larger purchases after they learned that they could first pay off the smaller ones. Many lenders will be more than willing to lend you money after you’ve filed bankruptcy. The important thing to remember is, just because the credit is available to you, it doesn’t mean that you need it
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