Rebuilding Your Credit
How to Rebuild Your Credit
Although bankruptcy can stay on your credit record for seven to ten years, in about two years you can probably rebuild your credit to a point that will get you approved for just about any loan, even a home mortgage. Most creditors look for steady employment and a history, after bankruptcy, of making and paying for purchases on credit.
Many creditors disregard bankruptcy entirely after four or five years. In the long run, bankruptcy may actually improve your ability to obtain future credit. One of the most important items on your credit report is your debt-to-income ratio and, after bankruptcy that number usually improves substantially because your debts are largely eliminated. Also, without the burden of debts you’ll be able to save for a down payment on property, which always improves your standing with lenders. You also may not realize you will be eligible for a Federally secured FHA Loan just two years after bankruptcy.
Create A Budget
The first step to rebuilding your credit is to stay within a budget. Controlling spending and saving money are essential after bankruptcy. Think about changes you can make to your spending habits to save even just a few dollars a week. Setting and achieving small goals can be very inspiring and lead you to much greater saving than you thought possible. Most people can usually cut at least 5% from their spending by simply avoiding impulse buying, paying cash for things, and preparing more meals at home.
Review Your Credit Report
Often credit reporting agencies will inadvertently put negative entries on your credit report that don’t belong there. With so many files to manage there are bound to be mistakes. It’s a good idea to periodically review your credit report to ensure all entries are accurate. If there are incorrect entries, you may challenge those items. The credit reporting agency will then correct your file, if they can’t verify the item. To contact the credit reporting agencies you can use the following links: www.equifax.com; www.experian.com; www.transunion.com.
Get a Loan Or a Secured Credit Card
Banks provide an excellent opportunity to rebuild your credit by offering secured loans or secured credit cards. Secured loans are linked to some piece of property such as your car or a piece of machinery you may own. If you don’t have any security to offer, it is usually possible to get a bank loan with a co-signer. For maximum benefit, keep the loan active for at least 6 months, even if you can pay it back sooner. This will give the bank a chance to report the loan to all three credit reporting agencies. Some things to consider when shopping for a loan are interest rate, and prepayment penalties. Naturally, you want the lowest interest possible with no prepayment penalty. Secured credit cards offer similar benefits to bank loans and give you a chance to rebuild credit.
Start Rebuilding Your Credit For The Future
If you are considering filing for bankruptcy we would like to offer our legal services to you. Now is the time to eliminate your debts, and stop debt collectors from harassing you. After bankruptcy you can start to rebuild your credit for a bright future. At McFarlin LLP we offer free consultations to prospective clients. Take the first step, and contact us today (888) 728 0044, or email us.
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