Your Credit After Filing Bankruptcy

There are many misconceptions about the impact of bankruptcy on your credit rating. Bankruptcy does not destroy your credit or bar you from having excellent credit in the future. Filing for bankruptcy may cause your credit score to fall 100+ points — or it may actually boost your credit if your credit is very poor now by discharging debts.

Bankruptcy gives you a fresh start, but you will have some new challenges after your bankruptcy is discharged. Knowing what to expect can help you ease the transition and reestablish your credit as soon as possible.

Getting Credit After Bankruptcy

Once your bankruptcy is discharged, it’s a good idea to reestablish your credit as soon as possible. How fast you build your credit score back up depends on many factors, including the amount of effort you put into it and your resources. For example, if you kept your home and reaffirmed your mortgage, making your mortgage payments on time will help improve your credit score over time. If you did not reaffirm the loan, your lender will not report any future payments you make to credit bureaus.

The first step is creating a budget to help you manage your finances and understand what you can afford each month. It’s also a good idea to build an emergency fund to protect you in case of an emergency so you won’t turn to credit. Be sure you order free copies of your credit report from TransUnion, Experian, and Equifax after your bankruptcy discharges to make sure your information is correct and there aren’t any negative accounts still reporting that are not included in the bankruptcy.

There are several options you can use to begin rebuilding your credit score immediately after bankruptcy:

• Secured credit card. A secured credit card requires a deposit. In most cases, your credit limit is equal to the deposit. Secured credit cards work just like regular cards and they report to credit bureaus to help build your credit score. Choose a card with no or a low annual fee and do not carry a balance.
• Secured loan. A secured loan, usually offered by a community bank or credit union, allows you to borrow against the money you have on deposit at the financial institution. While you are paying off the loan, you will not have access to the money in your deposit account. Be sure the financial institution reports your payment history to credit bureaus.
• Authorized user status on someone else’s credit card. Be sure the card issuer reports payment activity by an authorized user to credit bureaus.
• Co-sign on a loan or credit card. This is a big responsibility to ask of someone, as co-signers are responsible for the debt if you do not pay, but a co-signer on a card or loan can help you establish credit.

Contact a Bankruptcy Attorney in Las Vegas

Establishing credit after bankruptcy is not as difficult as it may seem. Lenders know you cannot file for bankruptcy for another 8 years and you will have a far lighter debt burden that helps make you a more attractive borrower than someone who is burdened by debt. If you have any questions about your credit after bankruptcy, your bankruptcy attorney can help. Contact the Vegas BK to find out if you qualify for Chapter 7 or Chapter 13 bankruptcy and what you can expect during and after you file bankruptcy.