Good Credit After Bankruptcy

Credit-cardsSix Steps To Success:

People have recovered a good FICO credit score within a year of Chapter 7 bankruptcy. There are some concrete steps you can take to get back in the reporting bureaus’ good graces–assuming that’s a place you’d like to be.

Be Honest With Yourself!

  • The root cause of “silly” debts that cause many bankruptcies, like high-interest rate revolving credit-card balances, is, at root, dishonesty.
  • If you can tell yourself you can afford something but really can’t, then make your lie true using cheap credit, you’ve still lied.
  • Admit it.
  • Now stop it.

Plot Your Course On The Financial Map

  • How entangled in the financial system do you need to become?
  • Most of us want to own our homes and must use a personal car to get around.
  • In most cases, those purchases will need financing. Fine. But what then? A credit card to rent a car? To shop on-line?
  • You might have other options, like pre-paid cards, debit cards or secured credit cards.
  • Decide how much debt you’ll tolerate–if any–this time around. Stick to it.

Get Smart!

  • Your FICO score will be yout friend, but first it must become your enemy.
  • After bankruptcy, make sure you check your credit score as often as practicable, or as often as you can afford to.
  • Watch for stubborn misreported entries, vindictive creditors refusing to show discharge information after a bankruptcy, or outright errors.
  • Get them corrected, stat.

Take Baby Steps

  • In many ways, secured credit cards aren’t credit cards at all, but rather debit cards that give you the extra advantage of rebuilding your credit score.
  • Secured cards give you the purchasing power of plastic without risk of overspending to you, or the bank.
  • Lenders tie limits on those accounts to an amount on deposit with them, so the lender has no risk in extending the credit.
  • Debtors trying to establish credit after bankruptcy get access to the plastic-pass key required to fully engage modern life. Everybody wins.
  • But note: where card offers were once everywhere, and almost anyone could get an unsecured card at a great rate, banks have responded to the financial crisis by sacrificing fair play with hard-working customers to feed the Wall Street profit-beast.
  • They’re lowering limits and raising rates, even on their best customers. The deals of the 90′s and 00′s are gone.

The Stuff You Keep Can Keep You Up

Reaffirmed debts–usually a mortgage or auto–in the Chapter 7, when accurately reported to bureaus, also help rebuild credit.

Be Wary Of Heights

  • Notice: bad people will come crawling out of the woodwork looking to take advantage of people seeking credit after bankruptcy.
  • Easy-credit, payday lenders, or rent-to-own outfits will be glad to lend and extend, but their fees and interest sometimes doubles or triples the amount borrowed.
  • A big-screen TV from the rental place? How does $3000 over retail sound? Commonly, payday lenders charge hundreds of percent on their loans. It’s cheaper to borrow from la Cosa Nostra. If it existed. Which it doesn’t.

Bottom Line For Buckeyes:

  • You can get credit after bankruptcy the same way you built it before: by making on-time, regular payments on those necessary, responsible, financed items or loans you borrow.
  • This time, however, you’ll have all the experience and wisdom you’ve earned to help make good decisions.
  • A bankruptcy entry will stay on your credit report for at least seven and as long as ten years, but if you play your secured cards right, there’s no reason it need be anything more than a nod to history.