Raising Your Credit: A Financial Plan After Bankruptcy
If you file for bankruptcy, this financial event can remain on your credit report for approximately 10 years. The process will create a dip in your credit score, making it difficult to secure loans for big-ticket items such as a home or car. Furthermore, if you do obtain a loan, the interest rate could be significant.
The good news is that you can take strategic steps to raise your credit score after bankruptcy. Working your way through the process will increase the likelihood of obtaining big loans within just a couple of years. Creditors know that a recent bankruptcy filer receives plenty of financial counseling, is experienced with debt and wants to rebuild his or her credit. This makes filers solid potential customers.
Raising your credit after bankruptcy
With a little effort, you can rebuild your credit. To begin the process, you should retain a copy of your credit report and review your status. Many online reporting agencies provide free credit reports. It is best to obtain a statement from all three of the following reporting agencies: Experian, Equifax and TransUnion. Once you receive the reports, be sure to review all information and report any discrepancies.
Next, you may want to submit an explanatory statement to the credit report agencies. This statement might include reasons for financial difficulty, what you have done to improve your financial status and your plan for future financial responsibility. This will appear on your report until you request that it be removed.
You should also develop a credit history. It may be difficult to be approved for an unsecured credit card, so begin with a secured account. This type of card requires you to secure your charge account by depositing money into a bank account. It is best if you chose a company that will allow your secured account to transform into unsecured status. The interest rate is higher for an unsecured account; however, this type of arrangement will help raise your credit score.
You want to purchase items on the credit card that you already have the cash to pay for in full. Pay off all charges early – before any interest accrues. Timely payments are added to that account’s history on your report.
Ultimately, it is important to monitor your credit status frequently. If you spot an issue, report it to the credit bureau immediately.
If you file for bankruptcy, you can strengthen your financial future. Think of the process as a new beginning. With time, you will be trusted among creditors and have the opportunity for financial loans.
If you have questions about bankruptcy or your credit, you should contact a qualified bankruptcy law attorney today.