Once you’ve filed bankruptcy, your credit score will typically bottom out at more than 200 points below where it was before you filed, but there are times when an individual simply has no other viable option than the financial and personal relief offered through a bankruptcy filing. Almost immediately, creditors stop harassing you, foreclosure proceedings stop, repossessions stop… you have time to breathe, step back and figure out exactly what to liquidate, pay off, and discharge in order to get the fresh start you so desperately need.
However, once the bankruptcy is discharged, what can you expect in terms of regaining some financial footing?
Contrary to popular belief, it really doesn’t matter where your credit score was before your bankruptcy filing, nor does it matter whether your credit report contained negative information or not (most people who end up filing bankruptcy DO have negative information and bad credit by the time they actually file), what will matter the most after your filing is the length of time that passes once it is on your credit report. Bankruptcy references remain on your credit report for seven years, and the more time passes, the easier it will be to improve your credit score. And once that seven years passes? You’ll start to see those things drop off your credit report, and assuming you’ve not added any further negative marks to your score, you should see a significant increase in your credit score.
But what can you do to improve your score before the seven years passes?
Even though it may seem impossible, you can actually begin to rebuild your credit almost immediately by working with companies that offer secured credit cards, small installment loans, or catalog shopping accounts (such as a Fingerhut Credit Account issued by WebBank). Many of these creditors specialize in working with those of us with less than perfect credit, offering special “fresh start” style programs designed to help rebuild credit. Once you’ve opened such an account, make sure you make your payments on-time, every time, and keep your credit utilization below 30%, and in a few years, your credit score could be as high as 700 or more.
While it may seem like it at the time, bankruptcy does not ruin have to ruin your credit forever, you just have to make sure that you use the “fresh start” that bankruptcy provides wisely by practicing good financial habits and working to rebuild your credit.
Here are a few options to consider when you’re ready to start rebuilding your credit, whether you have a bankruptcy or not:
Bankruptcy literally causes your credit score to bottom out, but you can recover from a bankruptcy if you’re willing to work at it. In fact, if you handle your finances properly after bankruptcy and start rebuilding your credit as soon as possible after your bankruptcy is discharged, you can recover long before the bankruptcy drops off your credit report. Truthfully, you won’t see an excellent credit score, but you can build your credit up to the point that you can get a credit card, you can buy a car, and you can even buy a house, as long as you’re willing to do the financial work that it takes to get there.
How quickly you are able to re-establish credit and how much you will pay for that credit depends largely on your behavior after your bankruptcy is discharged. If you immediately start handling your financial affairs responsibly by paying all of your bills on time, not applying for a bunch of credit all at once, and keeping your balances low when you do get credit, your credit score will begin to improve.
Wondering where you’ll be able to get credit after bankruptcy? Unbelievably, you may begin to get credit card offers even before your bankruptcy is discharged. Granted, these offers won’t be from the mainstream lenders that offer the best interest rates, but you will receive offers. Chances are, these offers will be from lenders that specialize in “subprime” credit cards that target those with less than perfect credit, and chances are, the interest rate will be astronomical and there will be fees attached to the credit card they are offering. You may even be tempted to pay those rates and those fees just to get credit of some kind. Don’t do it – that’s not the best way to start! There are other options.
The first, and probably the easiest, way to get started is to get a secured credit card. Unlike a conventional credit card, a secured credit card is literally secured by a deposit that you pay when you set up the credit card account. Typically, the amount of the security deposit will equal the amount of available credit that you have on the credit card. But, there is a huge advantage to a secured credit card – the interest rates and fees (if any) will likely be far lower than a subprime credit card.
Other than that, it will work just like a regular credit card. You’ll make purchases with the card, get statements in the mail or online, and you’ll make payments on the balance owed. And, just like a conventional credit card, the secured credit card lender should report your responsible use to the major credit bureaus, thus starting you on the path to better credit. (If they don’t report to the credit bureaus, you don’t want the card.)
Many secured credit card companies will even convert your account into a conventional, unsecured credit card account after a reasonable period of time has elapsed. It all depends on the card you choose, so shop wisely and read the fine print!
The other way that you may try to get started on rebuilding your credit is to consider a catalog shopping or gas credit card. Catalog shopping cards and gas credit cards are typically easier to get than conventional credit cards, but most of these lenders also report your responsible use to the major credit bureaus, so they make good starting points when you’re seriously trying to rebuild your credit score and don’t have a lot of money to put into security deposits and such.
Fingerhut is one of our favorite catalog shopping companies simply because they do work with those of us with less than perfect credit and because they’re pretty competitive in terms of interest rates, merchandise selection and pricing, and so on. If you haven’t looked at Fingerhut in a while, you may want to look into opening a Fingerhut Credit Account issued by WebBank.
From past experience, we’ve seen lots of people recover from all kinds of credit setbacks, from multiple bankruptcies, repossessions, and more, but the single most important thing that you must remember when you are trying to rebuild your credit after a bankruptcy is that you must be willing to put in the time and the effort that it takes to get it done.
There will be times when it is discouraging… you may find that you’re turned down by some lenders, but there are lenders who will work with you as long as you’re working at it yourself, and the best way to do that is to PROVE your credit worthiness as soon as you can!
Looking for ways to get a fresh start after a bankruptcy?
In an earlier post, we talked about using a secured credit card account to start the rebuilding process after a bankruptcy filing, and we went through the reasons why getting a fresh start early on can help speed up the process of re-establishing credit. Another way to re-establish your credit is to open an account with a store/catalog sales site like Fingerhut.
How can Fingerhut help you recover from bankruptcy?
Unlike a lot of store/catalog sites, Fingerhut works with those of us with less than perfect credit and chances are, you may still get approved for Fingerhut, even with that bankruptcy on your credit report.
A Fingerhut account can help your credit in two ways:
Your regular payments will be noted on your credit report, thereby helping you to begin to rebuild your payment history.
Your available credit will be reported as well, and in the event that your credit limit is increased, that will also be reflected. Just make sure that you keep your “available credit” around 75% of your total credit limit, because that is an important factor in calculating your credit score.
And finally, there is another reason to consider Fingerhut – buying power!
Let’s face it, when you have no credit, it’s really hard to buy some things… things that you want or need. Fingerhut offers a great selection of name brand merchandise at great prices, and the prices are listed two ways on their website – the full price is shown AND they show you the monthly payment amount, so you know how much you’ll have to pay each month before you buy.
Think Fingerhut might be the right choice for you?
Getting a fresh start on your credit after filing bankruptcy can be nearly impossible.
Your credit score bottoms out, typically you don’t have a lot of money on hand, and no one wants to extend any kind of credit to you. It can and will take years to recover, but did you know that there are ways to start improving your credit score as soon as the bankruptcy is finalized?
One of the best ways to re-establish credit after bankruptcy is to open a secured credit card account.
With a secured credit card, there is usually no question whether or not they will open the account – you’ll just need the security (deposit) that they will hold against the account. In some cases, you’ll be limited to a specified credit limit, and in others, you can set the credit limit simply by putting more funds in the security deposit account. Either way, you can apply for and get a credit card relatively fast, and just like regular credit cards, secured cards typically report to the credit bureaus so you’ll start rebuilding your credit right away.
Secured credit cards can help in two ways:
A secured credit card helps you to rebuild the amount of available credit on your credit report. This is a very important part of your credit score, and the more available but unused credit that you have, the better it affects your credit score.
Demonstrating responsible usage of your secured card, including making timely, regular payments, can also affect your credit score in a very positive way. Credit is measured not only by available credit, but by the length of time that you hold accounts, and by your history of timely, regular payments.
Not sure which secured credit card is right for you?
A bad credit rating can be viewed as a mountain to climb for those affected by it. Consumers may deem themselves in a position where they are unable to receive any finance from lenders. This is however, not true.
“The truth: even with the worst credit, even one day after bankruptcy, an individual with bad credit may still obtain a credit card, a car loan or a home mortgage loan” (Attorney M. Brenner 2008).
Consumers have finance available to them regardless of bad credit as long as they are able to qualify through other requirements. Through fulfilling these requirements, opportunities of car loans or car credit will be made available.
Collateral can be a huge deciding factor when lenders are considering applications. Collateral, normally based upon fixed assets such as property, can be secured by the finance company. The collateral is used, as a source of payment, if a consumer does not make repayments of the full amount within an agreed time.
“This does not mean that credit or income requirements will be overlooked by the mere fact of applying for a secured bad credit loan instead of an unsecured loan. However, it is true that you can boost your chances by doing so” (Witts 2008).
Unsecured loans are still available for consumers with bad credit. These loans will be subject to higher interest rates and lower loan amounts but are still a viable option for those with bad credit. Those with bad credit can use co-signatories or guarantors in order to secure loans such as car credit.
“This will greatly reduce the risk and thus, ease the requirements for approval” (Witts 2008).
Consumer’s confidence in spending has fallen, effecting large purchases.
“Research, conducted in February, is one of the first pieces of evidence that the public are changing their behaviour to take account of the economic slowdown. Of the factors slowing spending, the biggest, cited by 44 per cent of people, was the rise in the cost of day-to-day living. One in six said they had received some big household bills; had seen their income plunge for another reason; or just felt they should be more careful in their spending”. (Hickman 2008).
Cars can be an expensive one off payment. The current economic climate means that consumers are less confident in their disposable income spending. Therefore the option of spreading that payment over a period of time in manageable monthly sums is more appealing to consumers.
Recent surveys from the RAC have indicated that a sizeable proportion of UK drivers are searching in order to reduce the size of their car. Consumers view the need for a smaller car for two reasons. 1; Cost and 2; maximising their car credit.
Companies such as creditplus.co.uk are specialists in finding consumers potential finance opportunities. They will sort through the major lenders and find the best finance deal available for specific consumers circumstances.
The use of loan calculators and other financial assistance tools provide consumers with an easy way to check if how much monthly payments would be and for how long these repayments would need to be made. However, this would all be dependant on the outcome credit checks carried out.
Article Sphere. 2008. Bad credit doesn’t have to be an obstacle. [Online] (Updated on 06 October 2008). Available at: http://www.articlesphere.com/Article/Bad-Credit-Doesn-t-Have-To-Be-An-Obstacle/158438 [Accessed 06 October 2008].
Debt workout. 2001. Introduction to Loan Options For Bad Credit Borrowers. [Online] (Updated on 01 April 2001). Available at: http://www.debtworkout.com/bad_credit/loan_help.html [Accessed 06 October 2008].
The Independent. 2008. Now the credit crunch is hitting home. [Online] (updated 16 April 2008). Available at: http://www.independent.co.uk/money/invest-save/now-the-credit-crunch-is-hitting-home-809603.html [Accessed 06 October 2008].
There is life after bankruptcy and once you have dissolved all your debts and the judge has dismissed the case. In a short matter of months, you will be inundated with offers to apply for new credit cards.
Sounds simple enough – right? Fill out a quick application online, cross your fingers, and push the submit button. Wait a minute. When applying for that new credit card after a bankruptcy, you should know where to apply before just arbitrarily thinking: “Here’s a credit card company. Let’s try this one.” You have to choose the right credit card companies before hitting that submit button.
You will get a lot of credit card offers but the bad news is these are not the credit cards you want. They are vultures ready to pick on the leftover meat.
Do Not Fall Into The Credit Trap Again!
Soon your mailbox will receive a credit card notice from several companies in North Dakota saying you’re preapproved for a new card. Problem is, these cards have annual fees with high interest rates. Or perhaps they want you to pay and upfront fee in order to get your application filled out. There are scams galore but you have to look pass these tempting offers of fast and easy credit. Their tactics are to send out as many letters to vulnerable bankruptcy victims and hope that one catches their bait.
Applying for credit cards after a bankruptcy is important since it’s a second form of identification other than your picture ID driver’s license or passport. Without two ID’s you’ll have problems at most stores.
Here are two legitimate banks/lenders to make application for credit cards. Both welcome new customers because they know that you are fresh out of a bankruptcy with little or no debt remaining, so you’re a nice target. The initial card limit will be less than $1,000 but there are NO upfront fees and if you pay on time, in several months they usually raise the limit. You can make that happen faster by paying more that the card asks for. Once you get your new credit cards, apply at several large retail stores, show them your new bank card, get their card, now you have more ID. Orchard bank and Household bank are two places to apply, so you can restart your credit history.
Focus on yourself and figure out how you will pay off future debt. Getting preloaded debit cards will help you with your spending. Getting credit from department stores will also help your credit as long as you do not spend what you do not have. Apply for secured credit cards as a last resort.
Once you have these cards in your arsenal, let time be your friend and your credit scores will slowly regain its former health.
About the Author: Derrick Kings invites you to get more information about how to improve your credit scores and what steps you can take to to evaluate your credit worthiness.
When you file for bankruptcy, it can have a very traumatic effect on you. The process of bankruptcy is such that the fact remains on your credit card report for a period of 10 years. Besides this, it can also lead to social isolation from your peers. Being branded bankrupt can have a very negative impact on your personality as well as your character, which need not always be the right perception. But through it all, bankruptcy is something that you can overcome.
One of the first things you need to do is to come to terms with the fact that you have declared bankruptcy. Once done, you have to face all the consequences that come along with it. There are several psychological aspects that get related to declaring bankruptcy. For one, you may retain the fear of purchasing anything at a retail store or from indulging once in a while. For some other integrating back into society can be difficult, leading to a lack of a social life. You first have to accept that the episode is over and done with and you need to move on. It is a learning experience and a lesson that you will adhere to for the rest of your life.
After bringing yourself back to reality, the next step is to work on your credit score. Once declared bankrupt, your credit reports will be a mess for a decade. You need to slowly work at fixing it. You have to work on aspects that will improve your credit rating. If you are looking for a loan, try approaching those lenders who take into account your credit rating for a short while prior to handing out the loan. A financial advisor or some serious Internet browsing is what can help you work on your credit scores.
The minute you are approved for a credit card or for a bank account, know your payment schedules well. Make written notes of them if necessary. Keep an accounts diary to track where you are using the card and how much you have spent. Knowing where the money goes, helps you keep a closer watch on your expenses. You will be able to monitor your spending habits this way. When you receive your bill, pay more than the amount due. This move will be noticed by the credit service. You can also make use of options such as standing orders or direct debts to ensure that you do not miss a payment date at all.
About the Author: Brian Joneta also writes about Bankruptcy and Credit issues including Declaring Personal Bankruptcy and Bankruptcy Lawyer
Concerned Consumers Ask How to Improve a Credit Score after Bankruptcy
While it may not be possible to erase bad credit reports, there are steps you can take to improve the overall health of your credit report and improve your credit history.
The February issue of Realtor magazine divulges seven tips to shore up your credit well being.
The article by Patrick Ritchie recommends identifying any mistakes on your credit report and attempting to have those rectified.
When reviewing your credit report, Ritchie advises looking at credit history such as late payments, collections, payment records, unusual accounts, original dates, available credit, types of accounts, and reason codes.
He suggests retaining a copy of your credit report for seven years to track the date of new additions or removals. Collections and chargeoffs should no longer be a part of your credit history or report after that length of time.
Unfortunately for some, review and maintenance of the credit report is not enough. Money and finance experts at media company AOL are fielding more and more bankruptcy questions from worried consumers asking how to improve a credit score after bankruptcy.
According to the media company’s personal finance site WalletPop, Chapter 7 bankruptcy filing remains on your report and is reflected in your credit score for 10 years after filing bankruptcy. One step to rebuilding and improving credit history includes eventually obtaining a new secured credit card and making payments in full, they say.
What is a Good Credit History Score for Lower Auto Rates?
Cautiously opening credit cards in college could spell benefits in the long-run.
One perk from building good credit history in college could be lower rates on auto insurance in the future.
“Despite all the criticism about college students and credit, now [during college] is a good time to get your first card and start building your credit history, as long as you can be sure to pay off the card each month,” says Kimberly Palmer, senior editor for U.S. News and World Reports.
According to national insurers, financially responsible applicants with a good credit history are eligible for savings on auto insurance plans.
A credit-based insurance score – which examines the likelihood of involvement in a future insurance claim – is used to determine auto plan rates. Factors like credit payment history and length of credit history can affect these calculations.
GMAC Insurance suggests paying bills on time and minimizing balances carried on credit cards as two ways to improve credit history and an insurance score.
According to research firm Conning & Co, 92 percent of insurance companies consider credit history information when evaluating new policies.
About the Author: This article is brought to you by Allison Tomek for NationalCreditReport.com. NationalCreditReport.com offers credit reports and monthly and annual credit monitoring services to help prevent identity theft. Our service accurately identifies your credit score and credit history.
So you have filed all of your papers with a bankruptcy lawyer and learned that the bankruptcy will stay on your credit record for at least the next ten years and you are feeling a little depressed. Everything in your financial life has been affected including your chances in the near future of getting a mortgage or car with a low interest rate. What do you do now? As odd as it sounds to some people many banks and companies out there want to do business with you, which in turn can help you start your financial life over. Increasing your credit score is not always easy, it is going to take some planning, will power, and even a little hard work. The good news is that it can be done.
Credit cards may be what put you into bankruptcy in the first place, but now it is your chance to use them to help you rebuild your credit history. I have a close friend who in 2006 declared bankruptcy, but she has worked hard to build up her credit and now has a very good standing with all three of the credit bureaus. Amazingly enough her credit score last time I talked to her is averaging around 730 for Transunion, Equifax, and Experian, which she thought would never be possible this soon after filing. It is true that she will have the bankruptcy on her permanent record for many more years, but at least she has a chance to get a home, car, or other asset at a decent price sometime in the future.
Throughout this rebuilding process you will want to closely monitor the changes in your credit reports. Many times mistakes are recorded in your credit report, some experts cite studies that say as much as 48% of all credit reports have errors in them that hurt the credit worthiness of the borrower. One of the nice things about some of the laws that have been passed recently is that a free report is available from each of the three credit bureaus on a yearly basis. So make sure you use these free reports to monitor and keep tabs on how your rebuilding process is progressing.
Some Tools You Can Use to Boost Your Credit Score
1) Secured Credit Cards: The amazing thing about these little plastic rectangular items is that they are one of the easiest ways to obtain credit after a bankruptcy. With a secured credit card you basically put a certain amount of money you have towards the card balance, and that is the credit line you will receive. So if you deposit $200 with the bank or financial company on that card then you will have a $200.00 credit line, just like some credit cards you have used in the past. If you make your payments on time and spend responsibly eventually the end result will be a positive impact on your credit score. My friend looked at her credit report six months after getting one of these cards and her score had actually increased by 20 points. What is also nice about the secured credit card is that if you make your payments on time they might eventually switch you over to an unsecured credit card and increase your credit line.
2) Big Box Store Cards: From researching these I have discovered that Harlem Furniture, Lowe’s, Menards, etc. might be willing to give you one of their cards even after you have declared bankruptcy, but their cards will definitely have a high interest rate for you. If you buy an item from one of these big box stores you have chosen for their credit card just make sure you pay responsibly and on time. Keep in mind that the final goal here is to show to the credit bureaus and future companies that you can make payments on time and can be trusted with more and better cards.
3) Piggy Back on Someone’s Good Credit: What on earth do I mean by that? I will go back to my friend who is married to someone with amazing credit. Because her husband had a great credit score she was able to “piggy back” on his good credit. Which means she was able to become an authorized user on a couple of his cards. She doesn’t even need to make purchases using those cards, but the credit bureaus will report that she is in good standing. You don’t even have to use your significant other’s credit to help yours, it could be a good friend that trusts you and won’t mind adding you as an authorized user. At the end of the day there are many tools at your disposable to help you with your newly cleaned credit slate.
Make sure you check on your credit reports periodically and dispute any mistakes that are not supposed to be on there. Establishing your new credit score is in your hands and you are ultimately responsible for proving to the credit bureaus and any creditors that you have changed your ways. With some discipline and hard work you can come out on top again financially, many people have gone down this path before you, and you will soon be ready to join the ranks of credit worthy consumers where you belong.
To get more information on how to get credit cards with bad credit go to http://www.creditcardsafter-bankruptcy.com
Welcome to Fresh Start Card Offers! If you’ve had a major life setback, such as divorce, bankruptcy, foreclosure, repossession……you know how hard it is to rebuild your credit! Fresh Start Card Offers was created for those of us with less than perfect credit. Not only do we have a few excellent deals for people with a blemished credit record, but we also have several card options that may actually help you to rebuild your credit rating over time. Check us out, compare offers, and apply online!
Be sure to bookmark our site, and come back often! We update it regularly with new offers, and we will be adding tips to improve your credit rating, credit card offers for other countries, and more!