How to Build Credit Post-Filing

As many people know, filing for bankruptcy will effect your credit score.  The question many people want to know is how much will their credit be effected, and how do they rebuild it after filing for bankruptcy.  It is nearly impossible to predict how far your credit score will fall after you file for bankruptcy.  The impact on your credit score is largely based on where your credit score is prior to when you file, and what type of information is on your credit report.   However, it is important to note that the bankruptcy filing is a one-time hit to your credit.  Assuming you receive a discharge in your bankruptcy, you will no longer owe any of the unsecured debts you list on your bankruptcy petition.  That means no more late payments and negative payment histories appearing on your credit report. You will have a fresh slate to work with.

Because you are presented with a fresh slate after filing for bankruptcy, it is important to focus on rebuilding your credit.  Some of the best ways to rebuild your credit after filing for bankruptcy are to obtain a secured credit card, obtain a small, regular credit card, reaffirm car loans and mortgages, and obtain new car loans.

One of the easier ways to begin rebuilding credit is to obtain a secured credit card.  You can receive a secured credit card through many banking institutions, and they will provide you with a solid way to build credit.  Secured credit cards work in the following way: The first step in the process you will make is to place a security deposit down with the bank for a certain amount.  The amount you place down as a security deposit will act as your credit limit.  So, for example, if you place $300 down as your security deposit, your credit limit on your secured credit card will be $300.  You can then use the card as you would with any other credit card to purchase gas for your car or necessary living expenses.  Then, each month, you pay off the full amount on the credit card.  If you do not make your monthly payments, the security deposit you put down will be used to cover your payments; however, all positive and negative payment history is reported to the credit bureaus.  The security deposit is there to protect the bank; it is not there for you to rely on to make your payments.

Another credit card option is to open up a small credit card at a store.  This is not as highly suggested as a secured credit card, but it will have the same effect on your credit. You can use this to purchase necessary living items, and then pay off the full balance each month.  It is important to be aware of interest rates when opening these credit cards.  You do not want to open up credit cards that have too high of interest rates, and get back into a situation where your credit could be negatively affected.

Reaffirming car loans and mortgages post-filing for bankruptcy is also another way to help rebuilding your credit.  By signing a reaffirmation agreement, you are assuming the liability of the loan again, just like you did when you originally signed the contact.  Once the reaffirmation agreement is in place, your positive payment history for your car payment and your mortgage payment will be reported to the credit bureaus.  If you can afford to make the payments on your secured loans, reaffirming is a great option to help you rebuild your credit.

If you do not have an existing car loan to reaffirm post-filing, purchasing a car with a loan post-filing is also a good option to help you rebuild your credit.  While, again, you want to make sure that you can afford to make the payments you are signing up for, if you can afford the car payment, the positive payments you make toward the loan will be reported to credit bureaus and will help improve your credit score.   Just like the credit card, you want to be wary of high interest rates that could cause you to get in over your head.

If you are interested in rebuilding your credit post-filing, it is important to note that anything that can help you build your credit can also cause negative effects on your credit score if payments are not made on time and in the correct amount.  While you should pursue some options for rebuilding your credit, you should not get in over your head.  Starting with something small, like a secured credit card, is perfectly fine. Or, just focusing on something you know you can afford, like your car payment or your mortgage payment, will help you rebuild your credit.  Taking small steps toward building a better credit score will help you in the long run.

If you have questions about how to rebuild your credit post-filing, your St. Louis bankruptcy attorney will be able to assist you with options and ideas.

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