Steps After Filing Bankruptcy

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Now that you’ve filed bankruptcy, it can be a scary time for many people. After all, statistics show that a majority of people who file for bankruptcy do so only once in their lives. That means you are now in uncharted territory. This is a good time to sit down with your bankruptcy attorney and ask about the best ways to improve your credit rating. The most common way to keep track of a person’s credit standing is with a FICO score, which ranges between 350 and 850. This score gives lenders and others looking into your credit history an idea of how successful you have been handling your finances. While every situation is unique, it isn’t unusual for someone to see their credit score drop into the 500s. Fortunately, it’s possible within a year to have your score at or near 700, considered an adequate to good score by most lenders. Ask your bankruptcy attorney what previous clients have done to boost their credit standing. Here are some of the steps you should consider:

  • Check your credit report. If you aren’t already familiar with your credit score and the other information available in your credit report, this is a good time to start regularly inspecting your report. Every American can get a free copy of their credit report once a year. Your bankruptcy attorney can tell you some of the important points to look over. Make sure you know what your score is and carefully look over all the items in the report to make sure there are no mistakes. Your record of payments, collection notices and other information in the report are used to come up with a score that lenders, employers and others can see. Mistakes are not uncommon in credit reports, and it’s possible that a mistake can lower your score. By following the rules to ask for a correction on any errors in your report, it’s possible to raise your score.
  • Get a credit card. At first blush, this may not make a lot of sense, particularly if high balances on credit cards were one of the reasons that you filed for bankruptcy protection. However, in the world of credit reports, the only way to improve your score is to show the three national reporting agencies – Experian, Equifax and TransUnion – that you can capably handle your finances. It may not be possible to get an unsecured credit card in the immediate aftermath of a bankruptcy. However, you can put up a deposit with a lender and received a secured card. Your deposit acts as the balance on the card. Make sure you pay off any purchases in full each month, and it’s also important to make sure the credit card company reports to the three credit bureaus.
  • Create a reasonable budget. If your financial problems were due to a divorce or an unexpected health event that wasn’t insured, budgeting may not be an issue for you. But for many people, listing all of your income and anticipated expenses, and then following your spending for a month or two can be extremely beneficial. You’ll learn what expenses are truly critical and how often you make purchases that are not part of your budget.
  • Be patient. Any bankruptcy attorney can probably attest that improving your credit picture after a bankruptcy isn’t something that happens overnight. For example, the credit bureaus use a formula that focus on a number of factors. Paying bills on time is 35 percent of the overall formula. That means you can slowly, but surely, improve your credit score by paying all of your bills on time every month.
  • Get a loan. Within six months or a year, it may be possible to get a car loan at an interest rate that isn’t outrageous. Bankruptcy experts say it’s important to have a variety of debt, and to pay all of it off on time, in order to make the best impression to the three national credit reporting agencies.

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1 Eagle Center, Suite #3A
O'Fallon, IL 62269
(618) 235-9800
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Granite City, IL 62040
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Salem, IL 62881
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Mt. Vernon, IL 62864
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Effingham, IL 62401
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