If you are considering bankruptcy, one of your concerns may be your ability to have good credit once again. Chances are you may have heard about how bankruptcies can stay on your report for many years after your discharge, and that lenders may be wary of your business because of it.
While it is true that bankruptcies can remain on your report for seven years, there are a number of ways that you can reestablish good credit quicker than you may think. This post will identify those ways.
- Maintain low balances - Believe it or not, but you will soon be inundated with credit card offers from lenders vying for your business. This may be a stark departure from lenders constantly denying your requests, but it is okay to open new credit card accounts, especially those with airline miles incentives or cash back programs. While this may seem too good to be true, the key to reestablishing credit is keeping balances low. Ideally, using a third of your credit limit or less can help you improve your score.
- Make payments on time - In addition to keeping new credit card balances low, making consistent on-time payments can help establish a new precedent for how you use credit. Some credit issuers may offer discounts for new customers who establish automatic monthly payments. So while you are showing that you are responsible with credit, you can save money on interest at the same time.
- Be aware of your balances - It is also helpful to check your credit report to make sure the new accounts you have are being correctly reported. As for the pre-bankruptcy accounts, they should reflect zero balances, even though they may include a notation "discharged in bankruptcy." Nothing will torpedo your credit score quicker than a showing of missed payments. Even worse, it will appear that you owe payments on accounts that you are no longer legally obligated to pay.
Ultimately, lenders want your business because they believe that people emerging from bankruptcy have a strong interest in rebuilding their credit, so these consumers are more likely to pay their bills on-time and follow basic credit rules.
If you have additional questions about obtaining credit after a bankruptcy, an experienced attorney can advise you.