A few years ago, when I realized that I couldn't pay my mortgage anymore, I knew that I needed to do something to correct my finances. It seemed like I just couldn't catch a break, and after losing my job, I knew that I was in trouble. I started looking for new work, but I knew that I needed to fix my credit somehow. I was at the end of my rope, until a friend talked with me about the possibility of declaring bankruptcy. She explained that it helped her to start over. I met with a bankruptcy attorney who was incredible to work with, and I was amazed at how much it helped my situation. Check out this blog to learn how working with a bankruptcy professional could help you.
Chapter 7 bankruptcy can be a good solution for debt problems, but it also has negative effects when it comes to your credit. If you want to rebuild your credit after you file, you may want to look into getting a secured credit card. Here are two things you should know about this.
How does Chapter 7 affect your credit?
As soon as you file for Chapter 7, the credit bureaus will be notified. Your credit report will contain an item that states you filed Chapter 7, and this is viewed as a derogatory item. This one item will stay on your report for up to 10 years from the date you filed, and it will cause your score to instantly drop anywhere from 160 to 220 points.
Your Chapter 7 filing will continue to affect your credit score until it drops off your credit report. While you cannot make this happen any sooner than 10 years, you can try to take other steps that will cause your score to increase.
How does a secured credit card help?
While it may be hard to get approved for a regular credit card after bankruptcy, it is not hard to get approved for a secured credit card. When you apply for a secured credit card, you will be required to deposit money into a savings account with the credit card company. They will then give you a credit card, but it may only have a limit that is equal to your deposit. Secured credit cards are not a risk for the lender, which is why they offer them to anyone, even people with bad credit.
Having a secured credit card can be one of the best methods for boosting your credit score, but it will take time. You will need to use the card every month and pay off the full balance when it is due each month.
When you do this, the credit card company will report the usage of the card, which will show you are consistently paying your bill each month. 65% of your credit score is based on your payment history and percentage of credit utilization. By using your credit card, you are building a good payment history. By paying it off, you are keeping your credit utilization rate at zero.
Over time, these factors will help your credit score increase, which will help offset the negative effects of your Chapter 7 bankruptcy.
If you are interested in finding additional ways to build your credit, talk to your chapter 7 bankruptcy attorney. He or she may be able to give you other ideas about how you can accomplish this.
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