Re-building your credit score after bankruptcy
June 24, 2010 Leave a comment
See my update on re-building you credit score here: http://bit.ly/K9czCD .
Good news! You can re-build your credit after your bankruptcy filing. Bankruptcy will lower your score and in general your score will probably lose around 1/3 of its value before the filing. Some clients already have a low score though b/c they are behind in their payments so they could see their score rise after bankruptcy b/c their debts are discharged.
You will usually get credit card solicitations after you get your discharge and I recommend clients use these new post-bankruptcy credit cards to improve their credit score. I recommend they use one card for groceries and one for their gas card. You buy these consumer items anyway so why not charge them on the new cards and then send a check to the credit card company. You can pay off your full balance each month and not pay any interest. You will then get a positive credit on your credit report each month as you pay off your full balance. In addition if you finance an auto after bankruptcy and you make your payments on time then you will get a positive report on your credit report for that too. Remember that you must have credit and use credit to benefit your credit score.
I usually tell my clients that if (for example) they can get the credit reporting agencies raise their score by 5 points a month b/c they pay their full credit balances each month, on time, and b/c they don’t carry high balances on the cards then the effect is cumulative. A 5 point increase per month (for example) would result in 70 points a year and 200 points in 3 years.
So manage your credit score after bankruptcy, do take on new debt, pay it on time and in full and you will in all probability watch your score rise!
I am a bankruptcy lawyer in San Diego.
For a free e-book: “13 THINGS YOU SHOULD DO TO PREPARE FOR YOUR BANKRUPTCY FILING” please send a request by e-mail to: email@example.com.