Using Credit After Bankruptcy

Posted byPaola Nadeau on Jul 2020 in Finance and investment | 0 comments

Now that you have been given a financial fresh start after hiring a bankruptcy attorney in Escondido who successfully filed and completed your Chapter 7 bankruptcy, it is time to start thinking about rebuilding your credit. Your credit score will slowly start to improve right after your bankruptcy is completed. Although it may take two to three years before you will be able to purchase a home again after a bankruptcy, having good credit will help you secure other types of loans with competitive interest rates.

Follow some of these smart tips to help you begin to rebuild your credit and avoid the pitfalls that got you in trouble in the first place.

Get a small credit card

One good way to begin re-establishing credit is to apply for a secured credit card. These are cards which are secured by a bank deposit. Essentially, a secured credit card is a pre-paid credit card. You deposit $500 into an account and you are free to use the money as you see fit. If you cannot make the payments, you surrender the money in the account. By making regular monthly payments, you show future creditors that you have the ability to manage your monthly debts. That being said, most consumers following a bankruptcy can get an unsecured credit card with an available balance of a few hundred dollars, so tying up your money in an account for a secured card may not be so attractive. The point is, whether you get a secured or unsecured card, make regular monthly payments on the account.

Avoid high cost lenders

Just because you hired a bankruptcy attorney in Escondido and filed bankruptcy does not mean the only credit you can get is the worst kind. If you cannot secure credit immediately following a bankruptcy at fairly competitive terms– don’t expect to get the best rates– then perhaps it is better to wait. Stay away from payday loan centers or title loan companies as their interest rates are exorbitant, and unless your need for cash is for a true emergency, simply don’t do it. It is a terrible mismanagement of your finances.

Make more than your minimum payments

As you get your first new credit card, stay away from the temptation to pay just the optional “minimum payment” they may offer. This payment may look great but it is so low– generally 1 percent of your balance plus interest and fees– that you will pay down the total debt very, very slowly. For example, if you have a credit card balance of $1,000 and have a 17% interest rate and you make only the minimum monthly payment, it will take 9 years to pay off that debt! And that is assuming you do not add to that debt amount with new purchases. If you are in a pinch during a month or so, you can make that minimum payment but it is much wiser to at least to make a payment that is at least 10% of your outstanding balance. Again, when it comes to rebuilding your credit, they key is to make regular monthly payments.

Bankruptcy attorney Escondido – A qualified bankruptcy attorney can offer you credit and budget counseling to help keep you out of future financial problems. Get in touch with Vista Bankruptcy.