Bankruptcy Is Not The End Of Credit, It’s The Beginning
Most bankruptcy filers are bombarded with financial auto loan offers and credit card offers after the bankruptcy case is filed, regardless of their level of income or the amount of money in their savings account at their personal bank.
Creditors know that a person cannot file bankruptcy again for years after his or her discharge, and they know that most people are anxious to turn the page and re-establish credit by the earliest possible date. Indeed, many find that during the years after filing, their net worth and personal finance improve drastically. Some even become savvy investors in stock or other financial products such as bonds, ETFs, mutual funds, CDs, or even cryptocurrencies.
Methods of Re-Establishing Credit
A person who files bankruptcy can re-establish credit almost immediately after the case is over regardless of how poor his or her credit may have been previously. Credit scoring companies examine several factors when computing a person’s credit score. Clearly, there are links between one’s credit score and one’s history of paying off debt.
While credit reporting agencies will not disclose their terms or methods of computing a person’s credit score, certain factors that either enhance or damage a credit score are very important to them and these include:
- Payment history (i.e., whether you have paid bills late)
- Amount of debt outstanding
- Length of credit history
- Amount of new credit applied for
There is no dispute that getting a credit card–and only one credit card–shortly after the bankruptcy is over is a good method of rebuilding credit.
Of course, the person must pay the credit card debt in a timely fashion and otherwise take action to maintain his or her credit-worthiness. For example, a person could set up his or her new credit card to pay for a streaming service on time every month. Similarly, one could use a new credit card at a store that sells traditional consumer products such as CDs, purchase one, and pay that off on time as well. This cycle repeated over time affects your credit score positively.
When can I re-establish credit?
People often ask: “How long after meeting with the trustee can I buy a house?” Most mortgage companies want a person to be 2 years post-bankruptcy. Thus, if one’s discharge is issued by the court on November 30, then one needs to wait 2 years from the date of November 30 before one can close on a house. It is important to note that this is based on the date of the discharge, not the filing date. Additionally, improved credit can lead to a better interest rate on your mortgage. Online courses provide users with mortgage calculators to help determine the amount of the monthly payment.
We advise people to obtain a credit card immediately after the bankruptcy. After using it to shop, payments made in a timely fashion will bring an improvement to your credit score. By comparison, late or missing payments will damage a credit score. If the person is careful about his/her credit, and does not fall short on his/her bills, then s/he will be able to obtain pre-approval for a mortgage loan. At Steinkamp and Associates, we have the tools to help you learn how to restore your credit and answer any questions you may have. We strive to provide a clear and educational experience during our consultations. As a counselor to debtors, many former clients have made recommendations to their family members to retain our services.
What if there are errors on my credit report?
Call us! I will guide you through the process of correcting your credit reports (for free) and prepare your case for a lawsuit if necessary.
WE UNDERSTAND CREDIT RESTORATION AFTER BANKRUPTCY
Unsure of whether or not bankruptcy is right for you? Want to see if you are eligible for bankruptcy? I am ready to discuss all your options with you in a free case evaluation. Find trusted, dedicated advice today at John Steinkamp & Associates.
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