An important tool to getting started rebuilding credit after bankruptcy is an unsecured credit card. You need to get credit to rebuild your credit. If you find that an unsecured card is not an available option for you, try to get a secured credit card. A secured card is like a pre-paid card. You deposit money into a bank account first and then charge off of that balance. One very important tip here: Use the card regularly but do not max out your available credit each month. Use only a small portion (less than 30%) at a time and pay off that entire amount each month. Regular, restrained usage of the card will help to build back your credit, and help you to personally develop some good financial habits. Sure, some experts may say, "live on cash only", and that's a great idea, but the goal here is to rebuild your credit score as quickly as possible.
When searching for a secured card, don't jump on the first one that comes along. Look for a card with no application fee with a low annual fee. Also, make sure that the credit card issuer reports to all three major credit bureaus: Experian, TransUnion and Equifax. It's not going to help you if your efforts go unreported. And, speaking of being rewarded for good deeds, look for a card that converts to unsecured after a period of 12 to 18 months. If you are paying your bills on time and proving yourself as a trusted consumer you should be able to get this upgrade.
Sunday, October 4, 2009
Friday, September 25, 2009
Rebuilding Credit After Bankruptcy
Did you know rebuilding credit after bankruptcy is a doable feat that anyone with the proper know-how can achieve? That is going to be the focus of this particular article: rebuilding your credit after a bankruptcy discharge.
While a chapter 7 bankruptcy remains as a stain on your credit report for ten years, it's not a lifetime. The crippling effects will not haunt you forever. In fact, even before that bankruptcy disappears from your credit report, you can be taking steps to tame that monkey on your back. You can even find yourself qualifying for loans with decent terms and good rates well before the ten years are up. The thing to remember is, the bankruptcy will legally remain on your report up to a decade, but the effect it has on your credit score will lessen starting the day after your discharge if you change your bad credit habits. This means you must always, always pay your bills on time. Every bill. Every time. I want you to be honest with yourself here, because you can get yourself into a whole heap of trouble all over again, so you must exercise discipline to achieve this goal. If you have any doubts that you are not up to the challenge or may fall victim to past bad habits, you should stop reading this right now and move on to another web page.
Making Sure the Past is History
The first thing you should do in your new life after bankruptcy is make sure that your credit report is correct. Often a report will continue to show some accounts as still open and overdue. This is a common problem individuals emerging from a bankruptcy have to face. Don't panic. Get in contact with the credit bureaus and get this straightened out immediately to make sure those accounts are reported properly or else you will just be spinning your wheels trying to rebuild your credit rating.
Mortgages After Bankruptcy
A home loan, even a high-rate mortgage is more than likely impossible in today's economic environment for a consumer fresh from bankruptcy. It is estimated that it will take about two years after bankruptcy discharge before you will qualify for an FHA loan. That is, if you have kept your nose clean and followed the suggestions mentioned earlier in this article. Buying a home is a huge step and should not be considered unless you know for sure that you can afford the payments and all the other costs of home ownership that go with it.
Auto Loans After Bankruptcy
This is a tough pill to swallow because of the high interest rate you can expect to be required to pay. It is not uncommon to be charged 20% or even higher interest for a car loan because of your recent bankruptcy. The nice thing, if you can call it that, is that after about two years of on-time payments you should be able to sell the car or trade it in for another at under 15% interest. Yes, I know, it is outrageous but I never said this was going to be a cake walk did I? Auto loans are a way, albeit a painful one, to help rebuild your credit and raise your credit score. The key is to make as big a down payment as possible and keep refinancing to get a lower rate even though it may take you 5 or 6 years to get it down to a reasonable percentage. Super big tip here: Choose a loan with no prepayment penalty.
Student Loans
Typically student loans are not dischargeable in a bankruptcy. If you still have a student loan, it is another perfect vehicle to rebuilding credit after bankruptcy. As stated before, make your loan payments on time, every time and, if possible, pay double or triple the minimum loan payment. Aside from making on-time payments, the best way to improve your credit score is by paying down existing debt. Just think, that student loan that upset you by not being included in the bankruptcy is actually going to help you rebuild your credit future.
While a chapter 7 bankruptcy remains as a stain on your credit report for ten years, it's not a lifetime. The crippling effects will not haunt you forever. In fact, even before that bankruptcy disappears from your credit report, you can be taking steps to tame that monkey on your back. You can even find yourself qualifying for loans with decent terms and good rates well before the ten years are up. The thing to remember is, the bankruptcy will legally remain on your report up to a decade, but the effect it has on your credit score will lessen starting the day after your discharge if you change your bad credit habits. This means you must always, always pay your bills on time. Every bill. Every time. I want you to be honest with yourself here, because you can get yourself into a whole heap of trouble all over again, so you must exercise discipline to achieve this goal. If you have any doubts that you are not up to the challenge or may fall victim to past bad habits, you should stop reading this right now and move on to another web page.
Making Sure the Past is History
The first thing you should do in your new life after bankruptcy is make sure that your credit report is correct. Often a report will continue to show some accounts as still open and overdue. This is a common problem individuals emerging from a bankruptcy have to face. Don't panic. Get in contact with the credit bureaus and get this straightened out immediately to make sure those accounts are reported properly or else you will just be spinning your wheels trying to rebuild your credit rating.
Mortgages After Bankruptcy
A home loan, even a high-rate mortgage is more than likely impossible in today's economic environment for a consumer fresh from bankruptcy. It is estimated that it will take about two years after bankruptcy discharge before you will qualify for an FHA loan. That is, if you have kept your nose clean and followed the suggestions mentioned earlier in this article. Buying a home is a huge step and should not be considered unless you know for sure that you can afford the payments and all the other costs of home ownership that go with it.
Auto Loans After Bankruptcy
This is a tough pill to swallow because of the high interest rate you can expect to be required to pay. It is not uncommon to be charged 20% or even higher interest for a car loan because of your recent bankruptcy. The nice thing, if you can call it that, is that after about two years of on-time payments you should be able to sell the car or trade it in for another at under 15% interest. Yes, I know, it is outrageous but I never said this was going to be a cake walk did I? Auto loans are a way, albeit a painful one, to help rebuild your credit and raise your credit score. The key is to make as big a down payment as possible and keep refinancing to get a lower rate even though it may take you 5 or 6 years to get it down to a reasonable percentage. Super big tip here: Choose a loan with no prepayment penalty.
Student Loans
Typically student loans are not dischargeable in a bankruptcy. If you still have a student loan, it is another perfect vehicle to rebuilding credit after bankruptcy. As stated before, make your loan payments on time, every time and, if possible, pay double or triple the minimum loan payment. Aside from making on-time payments, the best way to improve your credit score is by paying down existing debt. Just think, that student loan that upset you by not being included in the bankruptcy is actually going to help you rebuild your credit future.
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