Life after Bankruptcy
Now that you've been discharged of most if not all of your debt, you've gained a degree of financial freedom. Consider this as a new beginning, not an end. Now, it's time to rebuild your credit. In the past, credit may have been your enemy, re-building your credit properly may make it a friend. It all depends on how you manage your finances from this day on.
After receiving their discharges, past clients have made the following typical comments:
"I've learned my lesson. I hate credit cards. I'll only use cash in the future."
"They're never sucking me in again. I'm through with banks and credit cards."
Although this is a natural reaction, such an attitude may in fact be a mistake. You must think of credit as a tool you can use to rebuild your financial future. This is the true lesson of your bankruptcy. Keep in mind four important points:
- Time heals all things, even your credit rating.
- Your efforts, as time passes, will help speed up the rebuilding of that credit.
- You will get offers for new credit; credit cards, car loans, and others.
- Although your bankruptcy filing will be on your credit report for up to ten years, this is not a death sentence. It is, instead, one of many factors that affect your overall credit. Although damaging of course, you have the power to repair the damage.
The Law Office of John C. Kim, P.C. can help you through the bankruptcy process. We can also help you through the rebuilding process. We can help you correct and properly update your credit report, rebuild your credit with an eye towards a brighter tomorrow -- turn credit from former enemy to future friend. Most likely, you'll get offers for unsecured credit right away. If finances are managed well, in as little time as one year after bankruptcy, people are able to receive car loans and mortgages for new homes. To help you get started, we've listed below the following information on how to begin to rebuild your credit, step-by-step.
REBUILD A NEW FINANCIAL LIFE: 10 STEPS
- After you get your discharge, live within your means. Remember that your debts should be no more than 20% of your expendable income after basic living expenses such as rent, food, and transportation.
- Open a checking or savings account at nearby bank.
- Try your best to save 10% of your paycheck. If you lack the discipline, simply ask your job to deduct 10% of your paycheck and deposit it into your savings account automatically.
- Do not limit yourself only to use of cash. Use checks; also apply for at least 1 credit card. It is best to have 3-5 credit cards. Use lenders who report to all 3 credit report agencies. Make sure you work on your 3 scores (Equifax, Transunion, and Experian see below for contact information) not only one. If you apply for a car loan in the future, car loan lenders pick any of the three, not necessarily the highest or middle score. If you want to buy a house in the future, mortgage companies look at your middle score.
- Don't apply for payday loans, or any "quick cash" offers for credit. Apply only for major credit issuers (retail store cards, known bank credit cards). Remember that any bank or financial institution loans make your credit score go down.
- Pay all your bills, including credit cards bills and utility bills, as soon as you receive the bill. The earlier the better but absolutely pay your bills on time. Make sure to allow for mailing time. Remember, up to a third of how your credit is rated is based on not just whether you pay your bills, but how you pay your bills. If you think you lack the discipline, set up automatic bill payment schedules online or through your bank.
- Minimize inquiries made on your credit report; each credit inquiry can lower your credit score up to 12 points. Remember that you can opt out of mailing lists that may lead to credit inquiries. Call (888) 5 OPT OUT and follow the instructions.
- Do not use more than 50% of your line credit on your credit cards. Pay early, but don't pay the entire balance. Keep a low balance running on each account. What you lose in interest on the low balance is offset by the increase in your credit rating. Why? Credit issuers like when a debtor keeps a balance on their accounts ? that how they make money -- and they'll report accordingly to the credit bureaus. An example: you have a credit card with a $1000.00 credit limit. Only spend up to $500.00 on the account. Pay early but don't pay the entire balance. Pay only $450.00 on the card and keep a balance of $50.00. The interest on the $50.00 will be minimal, only a few dollars depending on the interest rate. Keeping a running minimal balance will increase your credit score better than paying off the entire balance. Rebuilding your credit faster and more efficiently may be worth a few dollars a month.
- Don't close credit card accounts.
- Focus on deleting negative information from all credit reports and fixing any errors. Credit bureaus deal with an astounding amount of information. By no means are they perfect records of your credit. In fact, even after you have been successfully discharged of your debts through bankruptcy, old debts may remain on your record. You can buy FICO credit scores on the following website: myfico.com/12. Under a new law, you may also be able to receive a free credit report. It's a good idea to check your credit reports every six months and make sure that all information is accurate
As you can tell by now, we provide a complete service, and we'll do it with a professional, one-on-one attitude. That's why we're not only different, we're better.
Be smart. Get the facts. Know the law.
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