McFerran Law, P.S.
Practicing Real Estate Law in Western Washington since 1986
September 19th, 2016
Life After Bankruptcy:
7 Steps to Rebuilding Your Credit
Declaring bankruptcy affects not just your finances and personal life, but your credit score as well. Your credit score often diminishes during the financially trying times leading up to bankruptcy. Each missed credit card, auto loan, or mortgage payment will take a hit on your credit score. If you elect to declare bankruptcy, your credit score will further decrease. A bankruptcy will remain on your credit report for up to 10 years, and there is a good chance your Fair Isaac Company score, more commonly known as your FICO rating, will be low following a bankruptcy. With this being said, you do not have to wait 10 years to rebuild a positive credit score. In just a few years following bankruptcy, your credit can improve drastically if these following steps are adhered to:
1. Review your credit report—It is important to begin the process of rebuilding your credit by first gaining an understanding of where you stand. You have the right to obtain one free credit report a year from Experian, TransUnion, and Equifax on annualcreditreport.com. Once you retain your copy, in addition to assessing your score, review the credit report for any errors. Contact the credit reporting agencies to correct any inaccuracies that will negatively impact your score.
2. Always pay your bills on time—Your payment history has a considerable impact on your credit score, making up 35% of the overall rating. Accordingly, one of the easiest ways to bring up your credit score is to pay your bills on time. It is helpful to put reminders on your calendar every month by the due date. Additionally, many services allow you to set up an automatic payment system, which will ensure you do not forget.
3. Cautiously apply for credit—Credit cards can play a critical role in rebuilding credit. If you did not keep a credit card open during bankruptcy, you should apply for one after your bankruptcy has been discharged. You may need to open a secured card, which requires you place a security deposit with the issuer. Make sure you do not repeat past mistakes—pay off the full balance whenever possible and be careful not to amass any significant debt.
4. Know your limits—For rebuilding credit, as well as ensuring a positive financial status, be aware of the limits on your credit cards and keep balances well below it. Use all credit cards sparingly and pay the bill on time, every time.
5. Be wary of credit repair services—You will likely receive mailings from companies promising to help repair your credit. Investigate any such services before you use them, as they may charge hefty fees and attain few results. You can rebuild your credit on your own at no cost.
6. Obtain a loan—A year or two after your bankruptcy, you may want to consider applying for a car loan or line of credit. Be sure the loan is affordable and that you can successfully pay it off. You may receive higher interest rates. Shop around and know that your rates will drop in the future with successful repayment of the loan.
7. Do not close accounts—After declaring bankruptcy, you may be leery of credit cards and lines of credit. Many individuals go so far as to close these lines of credit. Taking this action can have a damaging effect on your credit. Closing accounts reduces the amount of credit available to you, thereby diminishing your credit score. Keep lines of credit open even if you do not use them.
Call us for a free bankruptcy consultation to see if you qualify for bankruptcy protection. Not only will we review your current financial circumstance, we will explain your options and the advantages/disadvantages of each. Bankruptcy is only one option. The number to call is 253-284-3838 to schedule an appointment at any of our offices in Tacoma, Kent, Seattle (Northgate), Everett and Silverdale.
Information received with permission by:
Richard J. Welt
Attorney at Law
McFerran Law, P.S.
1833 No. 105th Street, Suite 101
Seattle, WA 98133
3906 So. 74th St 1833 No. 105th St, Ste. 101 25028 104th Ave SE
Tacoma, WA 98409 Seattle, WA 98133 Kent, WA 98031
2520 Colby Ave, Ste. 101 9633 Levin Rd, Suite 101
Everett, WA 98201 Silverdale, WA 98383
McFerran Law is a debt relief agency as defined by federal bankruptcy law.