Repairing Your Credit Through Bankruptcy
I always tell my clients that a bad credit score is not by itself a reason to file bankruptcy– the reason to file bankruptcy is because you cannot pay the debts you owe. If that is the reason you have a bad credit score, then bankruptcy can help. After your bankruptcy discharge, you or your small business can have the clean financial slate you need to begin to rebuild your credit.
No lawyer should tell you that they can magically give you a perfect credit score after a bankruptcy. You need to understand that restoring your credit after bankruptcy is not something that happens overnight. But if your credit score is already damaged by bad debt, charge-offs, repossessions, law-suits, judgements, high debt-to-income ratios, and similar problems, bankruptcy relief may well be part of the road to recovery for you. Proper bankruptcy debt relief can go hand in hand with credit repair.
Steps to Effective Credit Repair
Remember that your goal is not to start borrowing again and to get right back into trouble. Your goal is to be able borrow reasonably again at a reasonable interest interest rate when it is necessary. Below are steps to take:
- Never go to payday advance loan places, title pawn lenders, or other high interest loan companies. Never. Ever. Period.
- Avoid new and unnecessary financial risks. Don’t fall victim to new credit card offers and loan offers after bankruptcy. Credit card and other lenders often prey on people after bankruptcy because they can charge very high interest rates. These lenders know that you are years away from future bankruptcy relief. If you need a credit card, only choose one with a reasonable interest rate. Always pay off such debt every month. Never borrow more than you can pay off every month.
- If possible, try to avoid having to take out a car loan right after your bankruptcy discharge. Interest rates on such loans immediately after bankruptcy are sky-high and will cost you much more in total payments.
- Make a budget and stick to it. Don’t just talk about it. Put it down in writing and look at the numbers. I will gladly go over it with you after your case at no extra charge. I want you to succeed.
- Establish a good payment record on the loans you are keeping. Pay those loans and your other bills on time. Show your creditors you can pay on time. If paying automatically from your bank account helps you do that, make sure you have the funds in your account on time.
- Review your credit report for mistakes. It is very common for credit reports to contain errors after a bankruptcy case is over. Wait about three months after your discharge and pull one of the three major reports (Equifax, Experian, and Transunion). You will likely find at least some information that is wrong and out of date.
- Follow the steps described in your credit report to correct those mistakes.
- Wait a few months until after you have completed that process before you pull another report.
- Don’t pull all three reports at one time. If you pull one from each of the companies every four months you can always get a free credit report throughout the year. Each company is required to make a free report available to you once a year.
You do not necessarily need a lawyer to correct your credit report but if you need help making sure your report is accurate I can also help you with that.
Guidance from a bankruptcy lawyer can help you decide whether filing for bankruptcy should be a part of your strategy to repair your credit.
Set up your free consultation today by calling my office at 865-470-4250 or contacting me online