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Repair Credit After Bankruptcy

Basically, there’s two major ways for filing a bankruptcy. Bankruptcy can either eliminate all of the debt, or it can pay back part of it. Choosing to filing Chapter 7 bankruptcy means you will not need to repay any amount and your debt will be completely removed. A part of the debt is repaid when filing Chapter 13. Regardless of filing Chapter 7 or 13, there will be a negative impact against your credit score once you have filed for bankruptcy. To repair credit after bankruptcy, you will have to spend some time and effort on the process. But rest assured it can indeed be done!

This negative impact to your credit score will be reflected for 10 years, in most cases, and after that the bankruptcy is discharged. The discussion here is how to improve your credit score after you have filed for bankruptcy.

Following a bankruptcy, it’s usually very difficult to find any kind of new financing. However, does that mean that person’s financial life and credit worthiness to be doomed for life or almost over? Thankfully, the simple answer to that is “NO.” Even if the effects of the bankruptcy are still on your last credit report, building the score back up is possible. To begin improving that credit score, one of the major way is by using secured lines of credit.

The first thing to do after filing bankruptcy is start saving some money as quickly as you can. Try saving $10 a month to $100. The goal should be save as much money as you can without worrying about the amount. I will explain. There are secured lines of credit where the lender will allow a credit account to be active after a bankruptcy, IF the maximum amount of credit that is being protected by an equal amount from your own funds.

So for you to have a $3,000 credit line, you will have to deposit $3000. This will remove any risk to the lender, should you default again, and the point is that their will be money safe. When you already have the same amount in your bank, why get a secured line of credit? To put it simply, this is start building your credit score! Many people tend to say, “I wouldn’t have filed for bankruptcy if I could save money!” What you need to know and remember is once you file for bankruptcy, you are now out of debt and don’t need to pay back anything. You will now have some breathing space, as well as the ability to pay the amount you use to pay for debts into a monthly savings. As I’ve mentioned before, you will have to start saving regardless of the amount you save. Sooner than you can imagine, you’ll have enough money to apply for a secured line of credit.

This now becomes a wonderful opportunity to start building up your credit score again. There is not a high amount of money at stake, and the lender isn’t running high on risk either. As you can see, once you’ve made a number of payments on time, a secure line of credit can improve your credit score.

After 2-4 years, you will even be eligible to for a mortgage or auto loan, or whatever else you might be needing. The longer you work on improving your credit score over a few years, these improvements will definitely end up being reflected on your credit report and that will significantly increase your chances of getting approval for comparatively larger loans.

The bankruptcy and it’s repercussions will still be there. You most likely will be required to pay higher down payments of interest rates. This is just some of the side-effect of bankruptcy that will hang on. This applies especially to Chapter 7 bankruptcy filings, as you did not repay any money and had all debt elminimated. Therefore, before you decide to file a Chapter 7 bankruptcy, be sure you have a plan in place for what you will do.

When faced with some hard economic times in the financial world, That’s the time to work on getting rid of your debt, slowly but surely, to make sure you are in a better financial position and able to avoid filing bankruptcy. Keeping a constant check on your credit report is also another good way. There are several credit monitoring companies available. You might consider having one of these companies keep a monthly check for you and see if your credit gets off track. It’s up to you to keep a constant eye on your credit report to prevent you from creating financial problems for yourself, like getting a mortgage loan or other kinds of loans that are too difficult to repay or you just can’t afford.

You can avoid problems associated with bankruptcy beforehand by checking into debt settlement options or get in touch with a reputable credit consolidation professional. They are there to help you get out of any financial difficulty you may be facing. If it’s too late for any of those options, then just start working on rebuilding your own future. As mentioned, a secured line of credit is a good way to improve your credit report. Start focusing on improving your credit score with regular, flawless payments. Know that others who have already gone through this have come out of it strong. You, too, can be one of them. Just make sure to create your plan and take whatever timely actions are needed NOW!

About The Author

Ben Todd

Ben was a seriously broke graduate student with bad credit who after finding himself rejected for any sort of credit card or loan for most of his adult life, finally decided to get his financial life in order. 'He spent several years reading as many financial advice books and blogs as he could.And suprisingly, Ben found he actually LIKED the topic of personal finance; after fixing his own finances, starting his own successful work at home website business, and using his earnings to get out of debt, created echeck.org to help others do likewise!

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