31 Oct2014
Written by CFB Blogger. Posted in Blog
In 2013, 1,107,699 individuals and businesses in the U.S. filed for Chapter 7 or Chapter 13 bankruptcy, according to government data. Although not something to savor, like a prime rib-eye steak or chocolate cream pie, filing for bankruptcy does not signify the end of your world. In fact, filing for bankruptcy can provide both individuals and businesses a way to eliminate much of their overwhelming debt and make a clean financial start. The attorneys at
Client First Bankruptcy agree that rebuilding your credit score is the most effective way to start on the road to a healthy new financial future.
When you file for bankruptcy, it is a fact that you will notice a negative impact on your credit score, writes Curtis Arnold for
The Huffington Post /Financial Education. This is of the utmost importance since lenders rely on credit scores, which range from 300 on the low end to the highest score of 850, to ascertain if you qualify for a home mortgage or car loan and at what interest rate.
How much your bankruptcy filing impacts that omnipotent credit score really depends on where you started. According to
FICO (Fair Isaac Corporation), which is the best-known firm that calculates credit scores, one with a high credit score of 780 would see their rating drop to between 540 and 560 after filing for bankruptcy, while one with a credit score of about 680 will see their FICO score drop between 150 and 180 points, to between 500 and 530, following a bankruptcy.
In April 2014, FICO reported that its median score was 711; scores of 550 or lower are considered “deep subprime” by lenders and carry high interest rates, if you do qualify for a loan.
“’Bankruptcy is a very difficult and emotional time since there are severe consequences, but it also represents a chance to “start over” from a financial sense,’” avers Bill Harddekopf, CEO at
LowCards.com. Harddekopf continues, “’One of the first things to do is to get a free copy of your credit report, which you are able to do once a year from each of the three major credit reporting agencies. [
Experian, TransUnion and Equifax] Check this for errors. Make sure you also determine your FICO credit score and work diligently to build up this score each month. Pay your bills on time. Don’t spend more than you can afford. Get a credit card that reports to the credit reporting agencies and pay off the entire balance each month so you don’t incur any interest charges–this will help slowly build your credit score.’”
The experienced bankruptcy attorneys at
Client First Bankruptcy firmly agree with this.
From the same news report, Gerri Detweiler, author of “
Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights”, advises to not shun credit following a bankruptcy. She maintains, “’Unfortunately, many people avoid credit afterward, which is understandable, but doesn’t help the situation.’” She states that it is important to “focus on responsibly repaying any loans — such as a car or student loan — that may have survived bankruptcy. ‘Continue to pay them on time. You may also want to get a secured credit card. Use it for one purchase a month (your cell phone bill for example) and pay it off right away, and it will provide a valuable credit reference. I’ve seen consumers boost their credit scores by 50-75 points or more in one or two years using this approach.’”
Other ways to re-establish your financial health following a bankruptcy filing bankruptcy include:
* Know your credit score — Get a copy of your credit report, review it for any inaccuracies and make note of your debts.
WisePiggy.com and
freecreditreport.com are reliable sites to get your score truly for free, without having to enter a credit card number.
*Open a new bank account — Opening a new checking and savings account will exhibit your financial stability. When you open your account, seriously consider signing up for automatic online bill pay, which will ensure that your bills are paid on time, a major aspect in establishing good credit.
*Apply for a secured credit card — Secured credit cards are one of the easiest ways to build credit and improve credit scores. Compare interest rates among different cards so you can select a card with the best rate and a low annual fee. A rate of about 15% and an annual fee less than $30 are preferred.
* Obtain a gas and/or a retail card — Gas and retail credit cards will also improve your credit. These types of cards do not usually require applicants to have good credit and, in fact, cater to those with blemished credit.
* Pay off your balance in full every month – When reestablishing your credit, it is paramount to pay off your entire balance each month. In addition to showing creditors that you are not a risk, timely payments have a significant positive impact on your credit score.
Since a bankruptcy can impact your credit for up to 10 years, be patient. The more active a role you take in reestablishing good credit, the more quickly you can rebound from your bankruptcy.
Don’t despair if you need to file a Chapter 7 or Chapter 13 bankruptcy. For experienced and knowledgeable Chapter 7 or Chapter 13 personal bankruptcy assistance, you can rely on the attorneys from
Client First Bankruptcy who have helped thousands of satisfied clients discharge their overwhelming debt. For your free initial consultation, please call our knowledgeable and compassionate lawyers toll-free at 800-383-6004. We answer our phones Monday-Friday from 8:30 a.m. – 6:00 p.m. Central Time. And log onto
www.clientfirstbankruptcy.com for vital and timely bankruptcy information 24/7 so you can get the information you need at your convenience.
