Anyone who has successfully filed for bankruptcy or used a debt relief program has just one step left — rebuilding credit and finances. It may seem daunting when you are at the very beginning but you are in a much better position than you were before. It is true that, in the immediate aftermath of a bankruptcy or debt settlement, your credit score will take a big hit. The impact is only temporary, however. As the years pass, you can still obtain the best interest rates on credit. If the impact that a bankruptcy or settlement can have on your credit score concerns you, a Morris County bankruptcy lawyer can help you separate fact from fiction.
Rebuilding Your Finances Following Bankruptcy or Settlement
The following are some of the most important steps you can take to rebuild your finances and credit score following a bankruptcy or settlement:
- Paying bills on time should be your priority. This is so important because 35% of your credit score involves whether you have been making payments on time. You should only be charging things you have the cash to pay at that instant. This way, when the credit card bill arrives, you will know that you have the cash to pay it in full each month. Do not carry a balance.
- Figure out a budget. A budget goes a long way towards meeting the first suggestion — paying bills on time. Track all of your expenses for several months. Identify where most of your money goes and determine whether you can make savings. List your priorities, and make sure that providing for you and your family and paying your bills are above luxuries and non-necessities. When you have more breathing room later, you can always start to splurge a little bit.
- Make sure your credit reports are accurate. The credit bureaus should be accurately reporting the accounts that you discharged in bankruptcy. If there is an error, bring it to the bureau’s attention immediately. You can check the three major bureau’s reports free once a year. Be sure to check all three, as creditors do not necessarily use the same one.
- Obtain an easy-to-get credit card. Gas and department store cards that you can only use at those stores are a good start. Do not carry a balance on these cards. Just use them to build credit and pay them off in full every month. In addition, a secured credit card is a good option. You can obtain these by providing the card companies with cash. If, for example, you give them $500, you will have a $500 limit. The card company knows you will be good for the debt because you have already provided the cash for it. Make sure these cards report to the credit bureaus before you sign up for them. You want your credit reports and scores to reflect your new lines of credit.
- Do not swear off credit forever. Many people who run into trouble with debt refuse to use credit ever again. This is a mistake, as the use of credit is required to obtain a good credit score. Instead, people who recently had a bankruptcy or debt settlement should take small steps and use credit responsibly. Another large portion of what determines your credit score is the amount of credit you have and the length of time that you have had it.
- Be wary of credit repair services. Many are not legitimate. They should not charge a fee before they have provided you any services. If it sounds too good to be true, it probably is. These companies cannot erase negative information about you on your credit reports, nor can you. The best you can do is to slowly, but surely put the bad times behind you.
By following these steps, people who have recently had a bankruptcy or settlement can quickly put their past behind them. Good credit will always be able to clean up bad credit. Contact a Morris County bankruptcy attorney at Ast & Schmidt, PC if you would like to learn about how a bankruptcy or debt settlement will impact your credit score.