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Though bankruptcy can help you get rid of your debts, getting credit after bankruptcy discharge is easier said than done. Fresh out of bankruptcy, people find it difficult to get a creditor to approve their loan petition. This is because bankruptcy stays on your credit report for a long duration. Chapter 7 bankruptcy stays for 10 years since no debt payment is made in this case. In the case of Chapter 13 bankruptcy, since some portion of debts are paid, this bankruptcy remains on your credit report for seven years.
Los Angeles based bankruptcy law firm Recovery Law Group says that the negative effect of bankruptcy can last for some time after getting a discharge. This is because the creditors do not receive any money that was owed to them. With bankruptcy on your credit report, prospective creditors are warned of the risk associated with lending money to a person who is fresh out of bankruptcy. Such people find it difficult to get credit at reasonable rates and end up getting high-interest rates credit cards, especially just after a bankruptcy discharge.
Rebuilding credit is possible!
The primary step is to check whether, after bankruptcy, your credit score is reported correctly on your credit report. Once you are aware of your credit score, you can start making efforts to rebuild your credit. Primary steps involve paying bills on time and getting under as little debt as possible. Other possibilities include:
- Secured credit card
This is one of the best ways to rebuild credit. These cards require a security deposit for account opening. This amount decides the credit limit. Making monthly payments on this card and living within means help you improve credit score. The card has a lower interest rate than normal unsecured credit cards. However, if you don’t pay the amount due, interest is added.
- Become an authorized user with someone else’s card
You could ask a friend or relative with excellent credit to make you an authorized user on their credit card. This will slowly help build your credit score since the primary account holder pays bills on time. In case the primary cardholder also has a large amount of debt or is behind his payments, this could affect your score negatively. Thus, you should choose the primary user carefully.
- Credit-builder loan
These are small personal loans which are aimed to provide people out of bankruptcy with financial assistance to improve their credit. On-time payments on such loans are reported to major credit building agencies which improve your credit rating.
Bankruptcy is a major decision which should not be taken lightly. For knowing more about bankruptcy proceedings and its effect on your credit score, call 888-297-6023 to speak with experienced lawyers.