7 Things to Know About Rebuilding Your Credit After Chapter 7 Bankruptcy

Seven things to know about credit score recovery

Image Source: Flickr CC User Linda Aslund

When you’re deep in debt that you can’t afford to pay, bankruptcy may be a fit solution. But what you get out of your bankruptcy depends on the effort you put into improving your finances after you get your discharge. Here’s a look at seven things to know about rebuilding your credit after Chapter 7 bankruptcy to guide you on your way to financial recovery.

#1 Write Yourself a Reality Check

You must make an honest assessment of what landed you in bankruptcy. Even if it was something out of your control – like a job loss or medical issue – knowing what caused the problem is an opportunity for better preparation in the future. Bankruptcy offers a fresh start, but you need to know what led to your previous financial issues so you can avoid or defeat them in the future.

#2 Correct Your Credit Reports – All Three

Make sure all accounts included in your bankruptcy petition are noted on all three credit reports (TransUnion, Equifax, and Experian) and that lenders are not reporting delinquencies every month as if the accounts are still open. Also, confirm there are zero balances on all accounts included in the bankruptcy. From there, continue to monitor your credit reports to ensure that older items fall off your report as they should.

#3 Establish Good Saving Habits

You need savings as a safety net against future financial problems. This includes both an emergency fund and retirement savings. You also need savings to help reestablish your credit after bankruptcy. You should be able to get a secured credit card and start rebuilding your FICO score within six to nine months of discharge – but secured cards will require a cash deposit.

#4 Establish Good Spending Habits

In addition to saving, controlling your spending is key. That means taking a hard look at where your money goes, what’s needed, and what fat can be trimmed. Now is the time to change any bad habits you’ve developed, get on a budget, and develop a conservative approach to spending that allows you to save and prevents you from over-extending yourself.

#5 Make Sure You Pay Everything on Time

Roughly 35% of your FICO score calculation is based on payment history. Paying on time and in full every month will help beef up that part of your score. When it comes to credit cards, paying more than once a month may be preferable. Thanks to online access and bill pay capability, you can make payments on credit cards every payday rather than waiting until the due date.

#6 Be Patient but Don’t Be Lazy

Another important component of your credit score is the length of your credit history. This means that the longer you have a credit account open, the more your score will boost. As soon as you can, post-bankruptcy, obtain a credit card (secured or unsecured) and start that clock ticking. You have to be patient when rebuilding your credit, but you should always be planning ahead.

#7 Don’t Expect Any Quick Fixes

If you’re tempted to have someone help you clean up your credit score after bankruptcy, such as a “credit repair program,” be careful. Bankruptcy will take care of your older accounts, and the residual cleaning you need to do – such as requesting old items be taken off or correcting accounts – you can do for yourself or work on with a qualified credit or bankruptcy attorney.

The bottom line is that rebuilding your credit score after bankruptcy will take a while. You can get started a few months after your bankruptcy is discharged, but it will be a gradual process. The good news is that people who are in debt and choose to file bankruptcy usually see their credit scores rebound much faster than those who don’t choose bankruptcy and continue to wallow in debt.

To find out more about the benefits of North Carolina bankruptcy, contact the Law Offices of John T Orcutt today. Call +1-833-627-0115 now for a free, no-obligation consultation at one of our convenient locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro or Wilmington. Plus check out Credit Score Keys for more information on rebuilding credit after bankruptcy.