Louisville Bankruptcy Watch: Repairing Your Credit

One of the main roadblocks people perceive as preventing them from filing for a Louisville bankruptcy is how it will impact their credit score. joy.jpg

Our Louisville bankruptcy attorneys want you to know, however, that bankruptcy is a means to restore your life – not tear it down.

It’s a common enough misconception, considering the hype that is often given to prevent people from doing so. That’s because it’s not necessarily beneficial for the banks and other creditors. And so much is tied to our credit score – such as our ability to secure a home, auto or student loan. Those with high FICO scores (a measurement of your credit) are considered better candidates for lending options.

The truth of the matter, though, is that while your score will go down in the wake of a Louisville bankruptcy, there are ways you can steadily improve it, while nursing your overall financial health and stability. In fact, a discharged bankruptcy is the first step toward a rapidly improving credit score.

First, know that a bankruptcy is going to remain on your credit score for as long as 10 years. That FICO score we mentioned will probably stay fairly low until you start to rebuild your credit. But typically late payments and high credit card balance have already lowered a consumer’s score long before they file for bankruptcy.

Here’s how you can do that after a bankruptcy:

1. Look over your credit report. This will help you take stock of where you’re at and where you’d like to be. Make sure to dig for any inconsistencies.

2. Make sure you are paying your bills on or before they are due. The history of your payments comprises roughly 35 percent of your credit score. That means one of the simplest ways to boost your score is to pay those bills when they’re due. If it helps, you may want to consider setting up a monthly calendar reminder that will notify you a few days before the due date. Another option that many creditors and banks offer is the ability to set up your payments electronically so you don’t lose track of time and forget.

3. When you apply for new credit, do so with great caution. If all of your major credit cards were discharged after your bankruptcy, it’s not a bad idea to get a new one. This may seem counterproductive, especially if credit cards were a huge part of the reason you got into trouble in the first place. However, having a card that you can pay off every month is going to help you incrementally improve your credit score.

4. After more than a year or so, you might want to consider getting a line of credit or a car loan. In either case, you’ll want it to be something you can afford. You’re probably going to be faced with a higher-than-average interest rate, but just remember that once your credit is restored, you’ll be able to get those lower rates.

5. Be wary of services that offer to repair your credit. Often, these agencies charge outlandish fees and in most cases, they aren’t necessary. You can do this on your own.

6. Take note of your limits. Yes, it’s important to start spending again, but you need to do so with more than a modicum of self-awareness.

7. Don’t close all your credit card accounts. Just like after a bad relationship when you swear off the opposite sex, swearing off credit cards isn’t realistic and, in truth, it can actually hurt your score. Keep the lines open, but don’t spend anymore on them. Cut them up if you have to.

And finally, take it easy on yourself. Be patient. Your Louisville bankruptcy did not occur in a few months, and it’s going to take longer than that to get you on a better path.

But don’t let that discourage you – because, truly, the grass is greener on the other side.

If you need to speak to a Kentucky bankruptcy attorney or Louisville foreclosure defense firm, contact the Schwartz Bankruptcy Law Center at 866-270-4495 for a free and confidential consultation to discuss your rights.

Additional Resources:
7 credit tips for after bankruptcy, By Britt Klontz, Money

More Blog Entries:
A New Year’s Resolution: Strengthening Your Finances Through Louisville Bankruptcy, Jan. 10, 2012, Louisville Bankruptcy Lawyers Blog

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