Credit: Bouncing Back After Bankruptcy

Bankruptcy, Bankruptcy Advice, Chapter 13, Chapter 7 Bankruptcy0 comments

In our experience, most debtors are not in the habit of filing for bankruptcy due to reckless and out of control spending. Instead, bankruptcy is usually preceded by a job loss, an accident, illness, or a death in the family. Understandably, these folks are the ones who need bankruptcy the most.

If you’re struggling with crushing debt but are still on the fence about filing bankruptcy because you’re afraid your credit will never recover, we have good news: It is entirely possible for a debtor’s credit to bounce back after bankruptcy and often, bankruptcy allows debtors to rebuild their credit much faster than if they never filed for bankruptcy.

Good Credit is Important

If you’ve ever applied for a credit card, an auto loan, or a mortgage, you’ve discovered the importance of good credit. Having a good FICO score opens a lot of doors and makes the credit and loan application processes a lot easier.

A good FICO score does more than just help you get approved for credit cards and auto loans, it impacts auto insurance premiums, whether you’ll have to pay a deposit for utilities, and whether you’ll be approved for an apartment or a rental home. Going further, your credit score determines your interest rates; in effect, a good credit score can save you thousands of dollars over the course of your life.

After bankruptcy, you may feel like you have to stay away from credit cards, but the opposite is true. Following a bankruptcy, you NEED credit cards to help you rebuild your credit and the sooner you get started, the better. In fact, it is possible to achieve a credit score in the 700s within two to three years following a bankruptcy discharge when you follow these steps:

  • Always pay your bills on time.
  • Don’t apply for too much credit.
  • After some time passes, consider taking out an auto loan or a mortgage, or both, to diversify your debts.
  • Do not charge too much on your cards. You want to use your cards, but you want to keep the balances very low, for example, don’t charge more than 10% of your credit lines.

By following the above basic principles, you will rebuild your credit and before you know it, your credit could be in the 700s. If you are interested in learning more about Chapter 7 and Chapter 13 bankruptcy, contact our firm to meet with a Harrisburg and York bankruptcy attorney for free.

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