Can I Rebuild Credit After Bankruptcy?
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Filing bankruptcy has a lasting effect on your credit score and your ability to gain lines of credit. However, filing bankruptcy can improve your credit, and there are steps to take to raise your credit score after bankruptcy.
If you are thinking about or already planning on filing bankruptcy, chances are your credit has already been affected, by slow or late payments, repossessions, extended credit or even foreclosures. Because of this, your credit after bankruptcy may actually be better than before, since the debts no longer count against your income once they have been discharged. A bankruptcy filing stays on your credit report for up to ten years, and late payments stay on for up to seven years, so the effects are similar, but bankruptcy gives you a chance to improve your credit faster because you will have an improved debt to income ratio to help.
So how do you rebuild your credit after bankruptcy? In some cases you may be able to keep one of your credit cards, this can happen in two ways. One way is to keep a card that you have no debt on, you don’t have to notify the company that you are filing, though they may find out anyway and cancel the card. The other way is to reaffirm a debt on a card, that means that you sign a contract with the company after you file bankruptcy that says you will pay off the debt anyway if they allow you to keep the card. Companies are usually willing to do this because they get paid for the debt, whereas if you didn’t reaffirm, it would be discharged in the bankruptcy.
Getting a new credit card after bankruptcy may improve your credit. You will pay higher interest rates and usually have a lower limit, but it is possible to get a credit card after bankruptcy. In order to improve your credit you must pay off the credit card each month instead of carrying a balance.
Once you do file your bankruptcy petition you will actually receive LOTS of credit card offers, lines of credit and more in the mail. Why? Because the companies know that you can only file bankruptcy once every 6 years. It’s easy to get caught up in the credit race again and fall behind, so choose wisely and spend even more cautiously. Your rule of thumb should be, if you don’t have the money to cover a purchase in your checking account, you should not use credit to purchase the item. By doing this and paying off your credit purchases each month your credit rating will increase rapidly.
