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How to Rebuild a Good Credit Score After Bankruptcy

After receiving your discharge

you can rebuild your credit.

 

Their are many ways to rebuild credit on your own. What you should do is first join a Credit Union in your area. Make a deposit for as little as $550.00 and up to $1,100.00 into a savings account with the Credit Union. In most cases you will  be able to borrow against that deposit the same day.

The amount of the loan will vary from institution to institution. In most cases you must retain 10% of the loan amount in the account.

You should choose a monthly payment that you can afford. You should also choose a repayment term of 36-60 months.

If you can, always pay more than the minimum monthly payment. This can be a small amount such as $10.00 a month.  *This will amortize the loan more rapidly. It will also result in the lender posting favorable  history on your credit report and with the bank.

 You may ask, why a Credit Union? In many cases after you have obtained a good  payment history with a Credit Union and have obtained a good credit score they will offer you an unsecured Visa and/or MasterCard while you pay down your secured loan with the Credit Union.

After you have paid the loan, the money that you borrowed is returned to the savings account, with interest.

Just remember, after bankruptcy, make sure that you keep yourself clean by making payments on time. Do not go back into debt unless you can afford the payments.

If you get other credit cards, make sure that you have the ability to pay the balances off monthly.  You can do this by only charging up to what you can afford to pay.   For example, you are planning to and already have the money to buy groceries.  You can purchase the groceries on a credit card and then make the payment immediately or at the least at the end of the month.. If you can not make the payment, then resist charge.

You may begin to receive credit card offers after you discharge in bankruptcy.  Do not be tempted to accept every credit card that is offered to you. There are offers that give you a small credit line but they charge a fee.  Those fees often exhaust most of the credit line and you start out in debt anywhere from $200.00 to $500.00 without ever making a purchase.  In addition some may also charge an annual fee and the interest rate practically amounts to usury. However, a Credit card with a small annual fee is acceptable.

Do not apply for credit on your until 6-12 months after discharge. If you get a pre-approve letter from a bank for a Visa or MasterCard, make sure that you call them first to get a clear understanding of the terms and conditions. Make sure that it is a credit card with Visa or MasterCard logo and not merely a credit card which you can only purchase merchandise.

Whatever you do, please do not obtain any personal loans from a outside source.

Some mortgage lenders will allow you to purchase a home after 2-3 years of your discharged.  This is subject to the rules and regulations.

 *By making larger payments than the minimal monthly payment you can pay off the total in less time. 

You will also save a considerable amount in interest charges.

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President Obama to Address Credit Card Abuse by Issuers

President Barack Obama met with the issuers of credit cards in an attempt to stop the abuses practiced by the issuing companies.  Credit card offers almost always come with what is called "teaser rates."  They offer low rates sometimes as low as 0% interest to entice you to apply for the card.  Once the introductory period is over you then receive interest rate increases which can go as high as 23%.

In many cases if you are late, even one day, with your payment your interest rate is increased.  In a lot of cases that one day penalty can happen even if your payment reaches the payment center on the day your payment is due but after a certain time, often 10 am.  (ex. Your payment is due on the 15th Of every month.  You send out your payment on the 12th and your payment reaches the payment center on the 15th but the payment is  processed  after 10 am. It can be considered as a late payment.)  This is just one of the many abuses by credit card issuers.  While the late payment is not reported to credit beaurus it triggers the penalty by increasing your interest rate and assessing excessive late fees.

Some of the things Obama is proposing is getting rid of the "fine print."  Amongst other things he is also suggesting a cap on interest rates, the borrower setting their own credit limit, and a cap on late fees.