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Bankruptcy: If I File, Will I Ever Get Credit Again

On Behalf of | Feb 13, 2012 | Credit

The short answer is yes, you will. Â While it will take patience and diligence to rebuild your good credit standing, you should be able to get some level of credit almost immediately after filing, regardless of whether you have opted for Chapter 7 or Chapter 13 bankruptcy.

When filing a Chapter 7 bankruptcy, you can opt to keep certain debts by signing a reaffirmation agreement and renewing the obligation. Â For instance, by reaffirming a car loan, you can keep the car. Now, every time you make a car payment, you are helping to rebuild your credit. Likewise, payments for rent, utilities, auto insurance, and other recurring bills can help to rebuild your credit score.

Another way to help rebuild your credit after bankruptcy is to obtain a secured credit card. A secured credit card gives you a credit limit equal to the amount of money you deposit into an account with the card issuer. The typical credit limit is no more than $500. Besides paying the balance off every month, the most important part of getting a secured credit card is making sure the company you use reports to all three credit bureaus. Preferably, the card issuer will provide the option of converting to an unsecured card following no more than 18 months of paying your bill on time. The most practical and least tempting unsecured credit cards are gas cards. If you are declined, try again with a co-signer.

One of the positives of filing bankruptcy is that you no longer have piles of bills to pay every month. This should allow you to start saving money. Money in the bank serves a couple of purposes. It’s a cushion for emergencies such as an unexpected medical bill or a major car repair. Additionally, looking down the road two or three years when you may want to buy a car or perhaps even a house, the bigger the down payment you make, the better your chances of getting credit; provided you continue to pay your bills on time and do not accrue other debt.

One of the things lenders look at is the ratio of debt to income. While you need to use credit to build a credit profile, you don’t have to let the balances carry over. Also, using credit does not mean living beyond your means. So pay off the cards every month to keep your debt-to-income ratio as low as possible.

Lastly, check your credit reports regularly to make sure your good payments are being noted.

With discipline and diligence, you can go a long way toward being creditworthy again within only a couple years after filing bankruptcy.