Had a Bankruptcy – 4 Critical Steps To Good Credit Scores

      Believe it or not, the hard part is over: the time leading up to filing a bankruptcy. In my experience, most folks suffer a lot about their morality, are they a good person or a bad person while they are considering a bankruptcy. Once the decision has been made, and you have begun the process by meeting with the bankruptcy attorney, it is time to start thinking about what is next for your credit history.

      Bankruptcy is not the end of your borrowing. Some like to think that it is only the beginning. I suggest you do the same. Chances are, before the bankruptcy, you were not allowed to borrow any more money because your credit accounts were frozen or locked from being delinquent and possibly charged off. However, with a bankruptcy “wiping the slate clean” so to speak, you can begin to get credit pretty quick. Not only can you, but you must re-establish credit if you are ever going to finance an automobile or buy a home at favorable affordable interest rates.

     Here are some steps to take to help you recover from a bankruptcy as quick as possible. If you are looking to purchase a home after a bankruptcy you will need to start this process perhaps even while you are in bankruptcy and certainly immediately after your discharge. Keep in mind that most lenders and Fannie Mae and Freddie Mac want to see two years from either your filing or your discharge date depending on your loan program.

     1. Reaffirm your mortgage and car loans. Reaffirming this debt is a critical first step to establishing positive credit on your credit report. If you reaffirm these debts with your creditors, you are telling them that you want to keep ownership and that you are going to make payments for them. If you are making payments, ask your creditor to report your payments to the credit bureaus. They may or may not, but it is worth asking. If you do not reaffirm your auto and home debts you might still be allowed to make payments on the accounts, but the credit history will probably not be reported to the credit bureaus which would not help your credit out at all. If this is the case, make your payments by check or electronically so you can track your payments. Cash receipts for payments are not acceptable in the lending world. It is too easy to sit down one night and make up your receipts – get electronic or cancelled check proof and you have what you need to prove your credit history.

     2. You will need to work on your credit report. Chances are you have seen your credit report at least once during or just before your bankruptcy. If you have not seen your credit report a while – Get Your Credit Report. If you recall it was pretty messy. Following a bankruptcy, once you get your discharge paperwork you will want to forward your paperwork to each of the credit bureaus to address every account that was included in your bankruptcy. For each credit bureau (or credit reporting agency) you will want to write out each creditor with its account number and tell the credit bureau that this account was included in bankruptcy and that it needs to reflect that on your credit report if it does not already. If you do not do this, you might end of with past due balances, continued negative payment histories etc. The creditors who were included in your bankruptcy do not care about your credit report. Do not rely on them to fix your credit report. Do it yourself. Along with your letter to the credit bureaus, make sure you send a copy of your credit report and your bankruptcy paperwork. They will need all of it. If you do not send it, you will delay your recovery.

      3. Get new credit established. This is probably one of the most critical things you can do. Start by setting up a couple of new credit lines. The easiest to set up are secured credit cards, and what we call a “passport” or "passbook" loan. Both of these options will require you to set some money aside. The secured credit card will require that you set aside around $300. You give this money to the credit card company and they give you a credit card that reports to the credit bureaus. Each month use your card and pay the balance. Do this for at least 6 months. This will get your credit scores on the rebound especially if you do this while you are cleaning up your credit report with the credit bureaus. The passport loan is a savings account with a bank. You put money in the account and then borrower against your own money. In this case, you will make monthly payments back to the bank to pay your money back. Do this at least 6 months too. Make sure you pay each of these accounts on time. Do not miss or be late on any payments or you will likely see your scores go down even more.

      4. Develop a story and a strong attitude about your situation. This might be easier said than done. However, it is critical that you come up with a story that sounds like you had no choice about your bankruptcy. Also, you need to come to grips with the fact that you are not a “bad” person for filing bankruptcy. You can spin your situation in one of being responsible. Think about it this way, if you have been suffering for years about whether to file a bankruptcy think about all the times that you were not truthful with those around you, or when you were not present with them. You could say that you were on another planet. Who lost out in this case? Certainly you did, but what about them? What about your kids? Did they get all of you? The answer is no, no they did not. Once you get straight about your bankruptcy and situation the better you will feel. You can then begin the process of recovering and get your credit back on track. You will be amazed how many people around you will tell you about their situation too. They might even have some additional tips you can use to get back on your feet.

      These are some of the best things you can do to improve your credit history and get your reputation back. The longer you delay this process the longer you will not be able to buy the house you want, or get the car you want.  Also, the longer you wait, the more you will pay for insurance; have to put deposits on electric, gas and cable accounts when you start them. What a pain in the neck. Get a started on your bankruptcy recovery today.