Written by San Mateo Bankruptcy Attorney, Jeena Cho

One of the biggest concerns my clients have before filing for bankruptcy is credit. I find that there is a major misconception in terms of how bankruptcy impacts your credit score, so let’s be clear on a few points.

Oftentimes, those filing for bankruptcy already have a relatively low credit score. The impact of late payments and robbing Peter to pay Paul as long as possible has already taken its toll. Seeing a bankruptcy on your credit report may make the creditors hesitant when it comes to giving you new credit but that doesn’t mean obtaining new credit is impossible.

While your bankruptcy filing will show on your credit report for up to 10 years, you can and should work to rebuild your credit score and should start doing so as soon as possible after your bankruptcy.

Paying on Your Retained Property or Non-Discharged Debt

One easy way to rebuild your credit is to faithfully make payments to any mortgage payments, or car payments – provided you chose to retain the home or the car. These timely payments should be reflected on your credit report and help to rebuild your credit. The same is true for any student loan payments.

Apply for Credit

Credit card debt may have been a problem in the past but applying for a credit card with a low limit may help you to rebuild your credit score. Use the card to make a small purchase you can pay off the same month – just enough time for the lender to report to the credit bureau. Remember, you don’t want to end up in debt again, so be careful about what you charge on your account.

You may find that the credit card offers you receive after bankruptcy are rather limiting. Many will ask for annual fees and secured credit card companies will ask you to make a deposit in the amount of your credit limit in order to open the account. Be sure to read the fine print. Many of these cards will charge you all sorts of fees for the privilege of having their card.

Installment or Automobile Loans

Installment loans, like those associated with car payments, are even better for rebuilding your credit if you can put down a 10 – 20% deposit and work within the confines of a high interest rate. Making timely payments on a sizeable installment loan will look even better than making payments on a small, often-revolving credit card balance.

Review Your Finances

You filed for bankruptcy for a reason. Don’t run out and apply for a credit card or loan before you know for sure you are ready to add additional payments to your budget. Some people file for bankruptcy, get rid of their debts, and still find themselves struggling financially. Bankruptcy isn’t a quick fix and you need to take your time as you reestablish your credit and your life.

Of course, you can’t work on rebuilding your credit until after your bankruptcy, so talking to a San Mateo bankruptcy attorney should be your first step. I would be happy to talk to you about the solutions most appropriate for your situation.

Photo Credit: James Jordan

Tagged as: bankruptcy, Consequence of filing for bankruptcy, credit repair, Life after bankruptcy, rebuilding credit, San Mateo Bankruptcy Attorney