If you have filed for bankruptcy, your credit score will be affected. So how can you be proactive and work to repair your credit? Here are some important steps to take to improve your credit:
1. Pay on Time (By Paying in Advance): Pay your current bills and loans reaffirmed in bankruptcy in advance. In Part One {LINK} and Two {LINK} of the KDB Law Firm series on credit and bankruptcy we discussed the easiest ways to both help, and conversely, harm, your FICO score: your payment history. As you now know, your payment history is 35% of your FICO score.
2. Follow Up with the Three Major Credit Reporting Agencies: Send each reporting agency a copy of your discharge notice as well as the schedule of creditors listed in your bankruptcy (schedules D, E, F). This is an important element to being repairing your credit after bankruptcy, as creditors are no longer able to report the discharged debt as owing on your credit file.
3. Monitor your Credit: Check with each credit agency quarterly to confirm that the creditors are abiding by the discharge order and your discharged debt is being accurately reported. If a creditor fails to accurately report the debt as discharged or is continuing to attempt to collect on the debt, they are committing “discharge violation”. If you notice such discharge violation, which is common in most cases, contact your attorney immediately.
4. Wait Before Seeking New Credit: Hold off as long as possible before seeking credit. You will find lenders who will make loans to you immediately after a bankruptcy, and they will seek you out. It is not uncommon to receive credit card offers in the mail even before you receive your discharge! However, you can expect to pay rates 5-10% higher than most people. That may not seem like a lot, but based on an average 30-year financial lifetime, the additional interest you could pay could end up as much as $200,000 or more.
5. Rebuild Credit with a Secured Credit Card: Many people looking to repair their credit start with a local credit union or bank and open a secured credit card. A secured card (meaning you back it with equal funds in a savings account) will help rebuild your credit history. After 6 months to a year of using a secured card you will find that you can get a more traditional credit card without having to put up the cash first. However, even then be very careful and read the fine print!
In summary: after you file for bankruptcy and receive your discharge, be sure to monitor your score diligently, pay your bills slightly in advance, wait until your score improves before seeking new lines of credit, and improve your score by using a secured credit card.
For more bankruptcy information, visit http://www.KDBLawFirm.net/.
Be safe and be well! ~Kirk Berkhimer, Norfolk Bankruptcy Attorney
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