Once you file for Chapter 7 bankruptcy, you will instantly experience relief from creditor harassment and debts you owe; however, your credit score will take a plunge. The sooner you begin working on rebuilding your credit, the faster you will have good credit once again. If this is what you want to do, here are the top steps you should take to rebuild your credit.
Dispute Every Error You Can Find
Did you know that you can receive a free credit report each year? Once you view your credit report, you might find things on your report that should not be there. If you view your report and find errors in it, you have the right to fight these errors. To do this, you must dispute each one with each of the credit bureaus.
Error disputation is not terribly difficult, but it is a process that takes time. The best way to dispute errors is by writing a letter to each bureau that contains the errors. With the letter, include any documentation that proves the items are not accurate. When the bureaus receive your letters, they must investigate your claims.
If they discover that you are right, they will remove the items or update them to accurately show the true status. While this process takes some time to complete, it will cause your score to increase if you win your disputes.
Get a Secured Loan and Secured Credit Card
Secured loans and credit cards are backed up with collateral, such as an asset or cash. You can get a secured credit card by applying for one and then depositing money into the account. Once you get approved, you may have a credit card with a line of credit that is equal to your deposit or even higher than your deposit.
To get a secured loan, you must also apply for one and place some type of collateral down, such as a car, piece of jewelry, or some other item that has value. Once you get approved, you can get cash from it along with a series of loan payments.
The point of taking a secured loan or getting a secured credit card is to offer a way for you to rebuild your payment history, which makes up over one-third of your credit score. When you get these things, you can rebuild your credit score simply by making the payments to them on time. Little by little, this will help your score increase.
Focus on Doing Everything Right with Your Credit
The other thing you can do is begin managing your finances more responsibly by doing all the right things. Here are some of the top things to focus on doing to improve your credit after bankruptcy:
- Avoid carrying balances on your credit cards. A good rule of thumb is to owe less than 30 percent of your limits on your credit card balances. If your card has a $1,000 limit, you should never carry over more than $330 on the card.
- Keep a balance of accounts. A good way to boost your score is to have multiple different types of open credit accounts, such as a few credit cards, a car loan, and a mortgage.
- Pay all bills on time. Paying all your bills on time will help you rebuild your payment history, so you should avoid making late payments.
You should also avoid applying for too many loans, as each time it will result in a hard inquiry on your credit report. Hard inquiries decrease credit scores.
One of the requirements of filing for bankruptcy is taking two credit counseling courses. These courses will teach you ways to rebuild your credit, too, and you can also talk to your lawyer about it. If you have not yet hired a bankruptcy lawyer, consider contacting Frances H. Hollinger, Attorney at Law.