Many people believe that once they have declared bankruptcy, they will never again have a “good” credit rating. This is a myth.
A debtor’s credit rating can be hit with as much as a 100-point deduction upon filing for bankruptcy relief. However, the debtor’s credit rating does not need to stay at the same low level for the ten years that the bankruptcy will be on record. There are a number of ways the debtor can regain points and rebuild credit, even after bankruptcy. It just takes time, patience, and some effort. As incredible as it may sound, a debtor may even start to rebuild their credit rating the day after his or her bankruptcy has been discharged. A good Iowa bankruptcy lawyer may advise their client of this during their consultations.
If you are a debtor looking to rebuild your credit score after having filed bankruptcy, the first thing you should do is to get a copy of your credit report and review it carefully. Credit reporting agencies do not always have accurate information. Even though a bankruptcy lowers your credit rating, you may find that there are other inaccurate or expired pieces of information that you may be able to have removed, and the removal of these inaccuracies will increase your credit score. If you do find errors, you should dispute them. To do so, check each credit reporting agency’s website for details on how to file a dispute.
Even immediately after receiving your debt discharge in bankruptcy, you may apply for a new credit card. While you included most or all of your credit cards in your bankruptcy, you will likely still qualify for either a secured or unsecured credit card. The rates will be higher and the limit will be lower than before, but a new card is a good place to begin rebuilding your credit score. Stick with one or two cards, manage your purchases carefully, and don’t overspend. You want to prove that you are a responsible borrower. If you have any questions, speak to an experienced Iowa bankruptcy lawyer.
Remember to keep your credit card balances low because your credit score keeps track of the amount of debt you are carrying, your payments, and the amount of credit available to you. It is wise to keep your debt load at about ten percent of your total available credit. Let’s say your available credit is $15,000. You would want to keep your purchases around $1,500, and promptly pay your balances in full each month. Paying your outstanding balances in full and on time is an effective strategy to increase your credit score. To stay on track, make a schedule or set reminders of when your payments are due, and be sure to pay them on time or even ahead of time. Over time your credit score will improve. It will take some time for your dedication to this method to actually reflect in your credit score, so you must remain steadfast in your efforts and focused on your goal.