Filing for bankruptcy undoubtedly affects your credit score adversely. A Chapter 13 bankruptcy stays on your credit history for 7 years, while a Chapter 7 filing stays on for 10 years. While filing can have its drawbacks, a St. Petersburg bankruptcy lawyer will tell you that it can be just as damaging to carry excessive, seriously delinquent debt on your record.
In fact, excessive debt that you are most likely not going to be able to pay back unless your financial situation drastically improves, can lead to such issues as lawsuits and wage garnishment. Judgments against you can be much more daunting than a bankruptcy hanging out on your credit report. In fact, those judgments can be seen as some creditors as more serious than a bankruptcy when you try and open new credit accounts.
In other words, a bankruptcy isn’t going to prevent you from being able to get a new credit card or buy a car. It is possible to quickly rebuild credit after bankruptcy. Below, you will find some ways to rebuild your credit so you can start a new financial life.
Ways to Rebuild Credit
Rebuilding your credit is how you are going to feed your financial freedom. However, the difference between now and the last time you built your credit is that you know what can happen if things get out of hand. Many times, individuals are more responsible with their credit after bankruptcy than they were the first time around. The following are ways you can rebuild your credit after bankruptcy:
- Build new credit. Think of the first credit card you had. Maybe your parents got you one in high school or college. This card probably had a very low limit for simple, small purchases. Now your credit is just like it was when you were in high school, but that’s no reason to despair. There are many companies offering secured cards, in which the applicant puts down a deposit of a hundred or a few hundred dollars against the line of credit. Some even put this initial deposit into an interest-earning savings account for you so you can save money while you rebuild your credit.
- Pay bills on time. Your payment history makes up over one third of your credit score. Simply paying all your bills on time every month can have a tremendous salutary effect on your rating. Once you have established a secured credit card, make small purchases and pay the balance each month. This ensures two things: that you do not rack up debt you cannot afford, and that your debt is only a small percentage of your limit. How much debt you have versus how much credit you have available also has an impact on your score.
- Build up cash reserves. Common financial wisdom among bankruptcy lawyers says you should always have six months emergency cash available in an emergency account, if possible. The stark truth is that the unexpected is always just around the corner, and the only question is whether you are preparing for it or not. A cash reserves gives you a cushion when the unexpected happens so that your credit doesn’t suffer. Unfortunately, people with no cash reserve find themselves experiencing a domino effect when something bad happens that affects them financially.
What to Expect when Rebuilding Credit
When you make the decision to start rebuilding credit after bankruptcy, it is true that it is going to be difficult to do. That is why the recommendation is to take a secured credit. The deposit required to open a secured account makes the account easier to acquire.
Approximately six months after bankruptcy, it is possible to get an auto loan with some lenders. However, the interest rate may be quite high because you are considered high risk. If you are willing to accept the high interest rate, then this is something to consider.
The average amount of time to obtain a home loan is two years. This is going to be contingent on a variety of factors, such as what other credit accounts you have established since filing bankruptcy and whether or not you have paid your payments on time. You also need to keep your debt-to-income ratio under control as you re-establish credit so you can successfully work toward the larger investments.
Bankruptcy as a Debt Relief Solution in Florida
Our law firm in Tampa has the knowledge and experience to help you pursue debt relief and stop repossession efforts. Contact our attorneys at Debt Relief Legal Group to schedule a free initial consultation. Call us at 1-800.DEBT.RELIEF (332.8735) or send us an e-mail to get started today.