We at Olsen Olsen and Daines are committed to helping our clients become informed on how to get the most from the fresh start provided by bankruptcy. Following is a written summary of the steps to credit restoration. In the client portal of our website we offer our clients our booklet Credit Restoration After Bankruptcy which outlines in detail the steps necessary for one to reestablish their credit.
STUCK IN A RUT?
Life with debt you cannot pay is like being stuck in a rut. You live from paycheck to paycheck and any extra money goes to pay the debt. You cannot save for the future and often are under the pressure of debt collectors' constant harassment. If you are concerned about credit impact after bankruptcy imagine what life will be like stuck in your rut of debt. You remain stuck in the rut along with the negative credit.
BREAK FREE FROM THE CHAINS OF DEBT!
Bankruptcy allows you to break free from the chains of debt. You get a fresh start financially. Yes, there will be credit impacts but you are out of the rut and free to get on with your life. Imagine the alternative - being stuck in your situation with the bad credit. Following these steps will put you on the path to restoring your credit after you have filed a bankruptcy.
CHAPTER 7 OR 13?
Contact our office for a free consultation to determine which form of bankruptcy is best for you. There are two types of consumer bankruptcies- chapter 7 and chapter 13. Chapter 7 is normal bankruptcy where you file and in a matter of several months you get your discharge or court order declaring you are free from your debts. In chapter 13 you will be making a payment to a trustee for several years. The steps here are designed primarily for persons who have filed chapter 7. Persons who file chapter 13 are restricted from obtaining new credit while in chapter 13 except when pre approval is obtained from the Trustee. However there are things chapter 13 filers can do so that when they emerge from chapter 13 protection they can be well on the way to reestablishing their credit.
INCOME BEFORE CREDIT
Even if you reestablish your credit rating it will not help you gain credit if you do not have sufficient income. Your ability to get credit is determined one factor more than anything else - your income. You could have perfect credit after bankruptcy but if the lender determines you are unable to pay for the loan you will not get the loan. Many persons are concerned about their credit when perhaps they should be more concerned about improving their income. There are several ways of improving your income. They include luck in getting a good paying job, working more hours and getting education or training for a higher paying job. Luck is just that - luck. Working more hours can only last so long. That leaves the best option - education or more training. Bankruptcy will not affect your ability to get student loans. Federal law specifically states that a person that has filed bankruptcy cannot be discriminated against in obtaining a student loan. It is actually easier for a person that has filed bankruptcy to get a student loan. Remember student loans can never be discharged in bankruptcy so if you decide to get more education make sure it is in a field where you can get a job.
YOUR CREDIT REPORT
After income your ability to get credit is determined by the credit score on your credit report. That score is a number creditors use to determine your credit worthiness. The highest number is 800. If you fit within a certain range you will get the loan you need. So in addition to working on increasing your income you will want to improve your credit score as reflected on your credit score. Details on how increase your credit score are outlined in our firm's Restoration of Credit After Bankruptcy book available on this website to our clients in the client portal but we will summarize some of these steps below.
CREDIT REPORT IMPROVEMENT STEPS
- Pay your existing credit bills on time.
- Obtain a Secured Credit Card
- Borrow on Funds you hold in the bank
If you have a car or house that you are keeping after the bankruptcy resume making that payment on time. Eventually that creditor will resume reports to credit bureaus which will help improve your credit score if you remain current.
One of the easiest ways to get positive reports on your credit report is to obtain a secured credit card. Use it and make the payments timely each and every month. A secured credit report is obtained by making a deposit with the bank offering the credit which remains as security for the card. The credit available normally will not exceed the amount of the deposit you made. Google secured credit cards for a list of banks offering these cards. Remember the idea is to have creditors make positive reports to your creditor bureaus.
Save up a $1000 or more. Place it in a certificate of deposit then borrow against that $1000 and make the payments on the loan timely to the bank. Once again, the purpose is for positive reports to be placed on your credit report.
REFRAIN FROM USING CREDIT IMPROVEMENT COMPANIES
Anything these companies can do - you can do better and at no cost. These companies are in our opinion in essence frauds and con artists who never deliver on what they promise. Google the name of the company and the word "rip off" to see what the companies can do for you.
DO NOT APPLY FOR CREDIT UNLESS YOU ARE CONFIDENT OF YOUR ABILITY TO GET THE CREDIT
Credit inquires can actually lower your credit rating. Use this option conservatively.
DO CONSIDER USING CREDIT ONLY FOR A HOME OR CAR
Interest paid on credit cards and cars is not tax deductible. They are expensive and the temptation to use the card can be strong. Interest paid on a home loan is tax deductible. Limit your use of credit cards, consider paying cash for a less expensive car and purchased a home with a payment that you can afford.
For more details and specific information consult Credit Restoration After Bankruptcy available to the clients of OlsenDaines in the client portal.