Debt

Many people prefer to avoid thinking about their credit score after being discharged from a Chapter 13 Bankruptcy. They assume that the bankruptcy will have done irreparable damage, and that it is useless to put effort into repairing their score.

It is true that a bankruptcy can stay on your credit report for ten years, and it is true that a bankruptcy damages a person’s credit score. However, not filing for bankruptcy with major amounts of debt can do the same amount of, if not more, damage to your credit score. So once your bankruptcy has been filed, how do you fix your credit score?

Credit repair is a long process that requires patience and determination. A Chapter 13 Bankruptcy can stay on a credit report for seven to ten years, but it can seem like a lifetime of bad credit– even if you pay off the debt early in your payment plan.

One of the major keys in credit repair is to check your credit report regularly. While there are free credit monitoring services like Credit Karma available, consumers are entitled to a free and complete credit report every year from each of the credit reporting agencies. These can be obtained through annualcreditreport.com (the only authorized website for free credit reports), or by calling 1-877-322-8228.

Once you have your credit report, make a list of all the debts that you have, and what the status is on each one. Make sure that details like addresses and name spellings are accurate, also. This is why the regular credit reports are needed, as you will need to make sure that payments are being reported in the correct amounts. Even a small mistake can lead to huge issues later on when you are trying to rebuild your credit.

The next step after bankruptcy is to start to reestablish credit as soon as you possibly can. Many people believe that they need to wait the 7 or 10 years for the bankruptcy to be removed from their credit report before they start fixing their credit. However, they can start credit repair right after the bankruptcy is finished being filed.

One of the major problems you may encounter is if none of your accounts are over 10 years old, as these accounts have already been removed from the scoring system. This can mean a bankruptcy would be reported, so you have the same credit score as an 18-year-old with no or very little credit history. Applying for credit very soon after the discharge of the bankruptcy will be crucial to start the credit repair process. Some common ways that people rebuild their credit is by using secured credit cards, store credit cards, and car loans. These options are favored because they have lower requirements to qualify for the credit.

Credit cards may seem like a great idea, and after you file for bankruptcy, your mail box may become full of them. While you would think that you are too much of a risk to have a new credit card, banks know that you are not going to be able to file again for at least 3 years. The rates of these credit cards are full of fees and high-interest rates. Make sure to read all the fine print before signing for the card.

Bankruptcy can seem like the end of the world, as it does so much damage to a credit score. However, with time and effort, rebuilding credit is possible. Remember that after 7 or 10 years the bankruptcy will fall off your credit report, and the work that you did after the bankruptcy will remain on it.