Rebuilding Credit After Bankruptcy
Anaheim attorney advises clients how to recover financially
After going through the bankruptcy process, it’s wise to be cautious about borrowing. But maintaining good credit is essential to financial health and security. As soon as possible after bankruptcy, you should plot out steps for rebuilding your credit rating. At Marlin Branstetter Attorney at Law in Anaheim, I work to get my clients’ debt discharged and advise them on achieving a fresh financial start.
How filing bankruptcy impacts credit
Filing for bankruptcy does hurt your credit. Your credit report will show a Chapter 7 bankruptcy for 10 years or a Chapter 13 for seven years. The lower your credit score, the harder it is to live comfortably and pay your bills. You may find it much harder to buy a car or even rent an apartment. Although federal law prohibits an employer from discriminating against individuals because they have filed for bankruptcy, some employers balk at hiring job candidates with low credit scores.
Steps to rebuilding credit after bankruptcy
Rebuilding your credit is not as complicated as you might thing. These are steps I recommend:
- Regularly check credit reports — The big three credit rating agencies rely on submitted data that is not always accurate. By reviewing the reports, you might spot erroneous damaging information. Correcting those errors in a timely manner will improve your score.
- Check your credit score — This may indicate areas of weakness where you can focus on improving.
- Apply for an appropriate credit product — Some lenders offer products designed to enable consumers to rebuild their rating. These include secured loans and credit-builder loans. You could also apply for a secured credit card, backed by a deposit you make to the card issuer.
- Find a co-signer — A friend or family member with good credit history can be your co-signer on a credit card or loan application. However, the co-signer assumes full responsibility for any debt incurred. Also, their personal credit can be affected by any default.
- Become a friend’s authorized user — You can ask a friend or relative to make you an authorized user of their credit card. Your borrowing and payment activity can be reported separately, which helps rebuild your credit. However, authorizing your usage puts the credit card owner at risk.
Rebuilding credit is a process that takes time. Be patient and disciplined, and you should soon see signs of score improvement.
Improving finances after bankruptcy
If you focus solely on rebuilding credit, you could wind up again in financial distress. You also need to control your spending and conserve funds. At my Anaheim bankruptcy law firm, I recommend the following steps to preserve liquidity:
- Create a budget — In a mandatory credit counseling course prior to bankruptcy discharge, debtors are drilled on the basics of creating and maintaining a budget. But designing a budget is one thing. You’ve actually got to live by it. This often means sacrificing unnecessary spending.
- Open an emergency savings account — If you can amass enough savings after meeting regular expenses, consider opening an account and depositing 10 percent of your take-home pay each period. This money should be spent only in emergencies.
- Pay bills on time — Not only do late payments adversely affect your credit score, but interest and late fees are a waste of resources.
- Review/cancel your subscriptions — It’s common for people to accumulate subscriptions to online or streaming services. You should decide which ones are essential and cancel all others.
Exercising financial discipline can be difficult if you’ve gotten used to living above your means, but well worth it in the long run.
Contact an Anaheim bankruptcy lawyer for debt relief assistance
At the firm of Marlin Branstetter Attorney at Law in Anaheim, I help clients obtain debt relief and counsel them on rebuilding credit. To schedule a time to speak with me, call 714-276-8589 or contact me online.
