Tips on how to rebuild your credit after bankruptcy
One of the questions I hear most often from my clients is "will I ever be able to buy a house or have good credit again?" The answer is yes. It wont happen over night, but there are a few key things you can do to get your credit score back up to where you want it.
Why is credit important?Often times clients who have just gone through a Chapter 7 think they would rather never see a credit card or finance agreement again. But the truth is, that having good credit is a skill that we all must work on and develop throughout our lives. 2 years after your Chapter 7 case, you will be eligible for an FHA backed mortgage, and good credit can be the difference between a mortgage with a very high interest rate (meaning less money in your pocket each month), and a prime interest rate, or when you are buying a car, in being approved for financing at a low interest rate for a new car vs. having to settle for a very high interest rate and a high car payment for a beat up lemon! Your credit can also be the difference between getting approved for a lease for an apartment. All of these things are necessities in life, and you do not want to be forced to pay top dollar for 2nd rate houses or cars because of your credit.
Don't be afraid of getting new creditUsing credit is how you build credit. Here are a couple of ways to get started if you received your Chapter 7 discharge of your debts: go to a local community bank and apply for a secured credit card. It will have a low limit, but it is a way to "get your foot back in the door, and start to rebuild your credit. Never charge more than 30% of the available limit on your credit card, and always pay it in full, initially, each month. Do not pay late. Read the contract. what date is the payment due each month? Mark your calendar in your iphone or smart phone to set up alerts, and set up automatic payments so that you stay on time and ahead of the game. Do not miss a payment.
If you are in the market for a vehicle, there are plenty of lenders who will offer financing. Beware- no doubt they will be charging you higher interest. Make sure you can afford the monthly car payment, plus the monthly cost of insurance, and that these two amounts fit comfortably into your monthly budget.
Review your credit report and fix any errors. You can obtain a free credit report by going to annualcreditreport.com. Read it carefully. Do the debts included in your bankruptcy show up on the report as "discharged"? are there any errors? If there are errors, you can write to each credit bureau, sending a letter certified mail. In your letter, describe the error and what you think needs to be done, i.e., it should be removed, etc., and they will get back to you within 30 days.