CONTRARY to popular belief, credit repair after bankruptcy is easier than you might think. If you are in debt and are thinking of bankruptcy as a last resort, perhaps the idea of not being able to get credit again is the only thing that is stopping you from doing what you need to do. Don’t be discouraged. You just need to know the necessary steps and they are not complicated at all.
Bill collectors will often tell you that your credit will be ruined forever if you file bankruptcy and that it is the worst mistake that you can ever make. This is a big lie. The truth is that there are simple steps that you can take after bankruptcy so that in as little as 2-4 years, you can significantly improve your credit score. Knowledge can become power but only if you use it. What you need to do is to become informed so that you can arm yourself with the knowledge that you need instead of simply believing everything that people tell you. In rebuilding your credit after past credit problems such as foreclosure, lawsuits, collections and bankruptcy, take the first step of trying to understand how the credit scoring system works. Go to a bookstore and get a few good books on this subject. For starters, you may want to purchase a book called, "Credit After Bankruptcy" by Stephen Snyder. You can also go to www.myfico.com where you will find some free educational materials that will help you understand your FICO score.
Although Chapter 7 stays on your credit report for 10 years (7 years for Chapter 13), you don’t need to wait that long to get credit again. First, you will need to open new lines of credit. Second, you will need to pay your bills on time and in full to start replacing "bad credit" with "good credit". Don’t be fooled by so-called "credit repair" companies who promise to delete your bankruptcy from your credit report, usually for hundreds or thousands of dollars. You cannot legally erase a bankruptcy from your credit report. But there are things you can do to shift the credit bureaus’ focus to your recent activities, from things that happened in the past.
When you file bankruptcy, you do not need to include credit cards with zero balances and unless the creditors find out about your bankruptcy through other means, you may keep those cards and use them to rebuild credit. On the other hand, if you are left with no credit cards after filing bankruptcy, there are still several credit card companies who will give you a "secured" Visa or MasterCard (in spite of your bankruptcy) if you pledge a certain amount (sometimes as low as $200) as collateral. I often advise clients to open at least 3 new credit card accounts with no less than $1,000 each. The higher the credit line, the better it will look on your credit report. Use these cards to pay for groceries, gas, etc. in lieu of cash and pay them off in full at the end of each month. Use no more than 30% of the outstanding credit line in any given month (i.e. do not max them out so prove that you are handling credit responsibly).
Purchasing a car is not a problem even after bankruptcy (as long as your bankruptcy has been discharged) although in the beginning, you will pay high interest rates. You may not have a choice but to do this in the beginning but after a year, see if you can find another lender who can refinance you. I suggest that you open a savings account with a credit union and start building a good relationship with them. After some time, ask them to help you with a refinance at a lower interest rate.
Bankruptcy is a beginning, not an end. If you are in debt, have a foreclosure or already have delinquent accounts on your credit report, you may actually be better off filing bankruptcy so you can wipe out your debts, start fresh and rebuild your credit as soon as possible. If you do nothing, your credit will be worse because as long as you remain delinquent, your creditors will continue to report you to the credit bureaus every single month. Does this make sense to you?
If you are in debt and need to find the best solution for your situation, call toll-free 1-866-477-7772 to schedule a free consultation. We have offices in Glendale, Cerritos, West Covina and Valencia.
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None of the information herein is intended to give legal advice for any specific situation. Atty. Ray Bulaon has successfully helped over 4,000 clients in getting out of debt. For a free attorney evaluation of your situation, please call Ray Bulaon Law Offices at TOLL FREE 1-866-477-7772. (Advertising Supplement)
( Published May 5, 2010 in Asian Journal Los Angeles p.B2 )
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