After you’ve completed your bankruptcy, it’s important to continue the positive momentum you’ve started by taking steps to rebuild your finances. And the first place to start is your credit. Although bankruptcy may not hurt your credit score as much as you anticipated, it’s likely that you took a hit. And it will be listed on your credit report for seven to 10 years, depending on which type you filed, which can impact your credit opportunities. Don’t despair, though. You can start rebuilding credit after bankruptcy with the tips discussed below.
How to Rebuild Credit After Bankruptcy
Some of the first steps you should take after bankruptcy include the following:
- Creating a budget. This will keep you on track and make sure you are not spending too much.
- Building an emergency fund. You should have enough money to cover a few months’ worth of bills in an emergency fund.
- Paying all bills and remaining debts on time. Don’t fall behind again; otherwise, you may find it difficult to catch back up.
- Obtaining secured credit cards/loans. This allows you to make small purchases and pay them off frequently, keeping credit usage manageable as well.
- Monitoring your credit report. Keep track of what is being filed regarding your credit and how the bankruptcy impacted your score.
Check Your Account Statuses
Every account on your credit report has an account status — o.e., “active,” “current,” or “delinquent.” After a bankruptcy discharge, each of the accounts that was included in your bankruptcy should indicate that it was “discharged” or “included in bankruptcy.” If they continue to say you are “delinquent” or “charged-off,” you can and should file a dispute. By taking action regarding the statuses of your accounts, you can make sure your credit begins improving right away.
Check Your Account Balances
When you file bankruptcy, the balance of your accounts should be discharged. Make sure your accounts do not say that you still owe an amount. They should show that you have a zero balance. You can challenge any accounts that were discharged and still show a balance owed.
Also, make sure the creditor hasn’t simply moved the balance to another account or collections agency. If your account was included in your bankruptcy discharge, then the balance should be zero on your credit report.
Be Aware of Collections Accounts
Many creditors will sell bad debt to collection agencies. If they did this before or after a bankruptcy, you may have an additional account pop up for an existing debt that was discharged. Once your bankruptcy results in a discharge of a debt, the collections account should be removed or it should indicate that it also has a balance of zero.
If the collections agency makes a promise to remove an account from your credit report, you should get that in writing. You may negotiate to make a payment on an old account in order to get them to remove the account from your credit report. Even if you are not obligated to pay the debt, this can be beneficial in some situations. You should speak with a lawyer before negotiating such a deal with a collection agency.
Assess the Good Accounts You’ve Lost Through Bankruptcy
In addition to getting rid of bad debt, you may have to eliminate debt you are managing or positive credit accounts as well. You may choose to sell your car or house to pay back creditors. You may lose a high value credit card account.
Any accounts that were in good standing may be lost through a bankruptcy. When rebuilding credit after bankruptcy, you should try to obtain those accounts that were in good standing and you lost because of your bankruptcy. This may involve a renewed promise to the creditor or reapplication when you qualify for credit again.
Don’t Apply for Too Much Credit After Bankruptcy
Surprisingly, you may be inundated by companies who want to give you credit after a bankruptcy. In truth, they know that you’ve recently discharged much of your debt, so you are likely to have disposable income. Although it can be helpful to incur some debt to begin rebuilding your credit, you shouldn’t apply for too much. Each application hits your credit report and too many open lines may not look good in the future. They may be too much of a temptation when you are starting fresh.
Speak to a Jackson Bankruptcy Attorney to Learn More
Rebuilding credit after bankruptcy can take years. But by making a plan and sticking to it, it is possible. The Law Office of Diane Anderson can help you get back on track with your finances. Contact us today to learn more about the bankruptcy and how it can help you.