One point of concern that people usually have before filing bankruptcy is how severely it will affect their credit scores. It is a known fact that your credit score report will stay for a period of up to ten years. Therefore it most certainly bears an impact on your credit score. But not filing for bankruptcy may have a more detrimental effect on your credit score.
Therefore once you have filed for bankruptcy it is important to undertake serious damage control measures to manage and improve the credit score. One step in this direction is to appoint a good bankruptcy attorney at http://mydebtadvisors.com/Madison-WI-Office-Location.shtml.
The importance of this can be understood by the official guidelines mentioned in the bankruptcy forms which state that “Completing the forms is only a part of the bankruptcy process. You are strongly encouraged to hire a qualified attorney not only to help you complete the forms but also to give you general advice about bankruptcy and to represent you in your bankruptcy case.”
Once done you can proceed to taking the below steps to boost your credit score:
- Keep a track of your credit score
Keeping a regular check on your credit score is important for all. It is highly advisable to keep a list of various debts that feature in the bankruptcy report and maintain a tab on it every couple of months after the debt has been discharged.
If you have claimed for bankruptcy under chapter 7, then the debt must show as $0 balance and should not be listed as delinquent. If you feel that something is amiss, you must report it to the credit reporter and also get in touch with the original lender.
- Re-establish credit at the earliest
While this may not sound ideal, but applying for credit after filing for bankruptcy is indeed a way to re-establish credit history and also build your credit score again.
Despite having a black mark on your credit report, there are some options open to initiate this process:
- Secured credit cards
For obtaining a secured credit card, the borrower has to give the lender (credit card company) a certain amount which is held by them as a collateral. The company then issues the borrower a credit card of the same value as the collateral. This type of credit card is easy to procure as the lender does not have to bear any risk.
- Store credit cards
These have a lower qualification limit but generally have a higher interest rate. Therefore one must read the terms and conditions thoroughly before signing on the dotted line.
- Car loans
These are easier to obtain if you are able to make a large down payment. If you do meet the criterion, it is advisable to buy a car within 6 months of clearing the bankruptcy.
- Offers on credit cards
People who have filed for bankruptcy are often bombarded with many credit card offers. This is quite baffling for people to understand as they would have thought that filing for bankruptcy would act as a hindrance to lenders.
But the banks know better. They understand that you will not be allowed to file for bankruptcy for the next 7 years. This puts you at a better risk level than before.
Over a period of time, the credit card reports will help to improve your credit score if you are able to make use of the credit cards and the rewards prudently. In order to do this, you must make sure to pay back the debt in full on time every month.
This will help to fill the credit report with A+ grades and by the time the bankruptcy is dropped, you will have managed to get a good credit score.
- Limit the number of new accounts
While it is important to register for new credit accounts in order to rebuild your credit score, one must not go overboard with it. It is wise to keep the new accounts with a set limit and spread it out over period of time. This will help to manage the accounts effectively and responsibly.
Credit rating companies do not consider it as a good sign if people open multiple new accounts all at once.