Post-Bankruptcy Credit Score Recovery

All bankruptcy debtors want to move on and put their pasts behind them. Increasing their credit scores is part of this process. This process is not as difficult as many people think, mostly because the initial credit score hit is much lower than people anticipate. Debtors with high credit scores see significant reductions. But most debtors don’t have high credit scores, thanks to repeated late payments, charge-offs, and other negative information. So, their scores effectively go from bad to worse.

Bankruptcy filings show creditors that debtors are facing up to their problems instead of ignoring them. So, with the help of a Chicago bankruptcy lawyer, complete credit score recovery is possible well before the filing falls off a credit record. In fact, if they follow a few simple tips, by the time the filing officially falls off their reports, many people have forgotten that they filed bankruptcy to begin with.

Pay Bills on Time

Paying rent, mortgage, car payments, and other such bills on time makes up a significant part of a credit score. So, by simply paying these bills on time, your credit score will probably go up.

Paying other bills on time indirectly affects your credit score. Medical bills are a good example. These bills don’t directly affect credit scores. But doctors quickly turn over unpaid accounts to debt buyers.

Medical bills and other unsecured debts are dischargeable in bankruptcy. This discharge allows families to quit spending money on credit cards and other unsecured debts and move that money elsewhere.

On a related note, many people make small additional payments on secured debts each month, such as an extra $100 a month on house payments. Most people won’t miss the extra money. And, the extra payments allow owners to pay off these loans earlier, saving them thousands of dollars.

Build a Reserve

This post-bankruptcy recovery tip is especially good for former Chapter 13 debtors. Once the judge closes the bankruptcy, many of these individuals keep making their monthly debt consolidation payments, at least for a few months. But instead of paying trustees, they pay themselves.

A financial reserve helps ensure that the next financial storm in life (divorce, job loss, etc.) doesn’t force a family under the waves.

A financial reserve also has an emotional effect. Instead of living hand-to-mouth and worrying about the future, families have a little more optimism. This optimism spills over to other areas of life.

Borrow Money

It seems counterintuitive to advise people with debt problems to borrow money. However, responsible credit use may be the fastest way to raise a credit score. After all, a credit score reflects the ability to responsibly use credit, not the ability to pay chase for everything.

Secured credit cards are usually available. Charge something every month, pay the bill every month, and watch your credit score go up.

Additionally, a Chicago bankruptcy lawyer has professional connections with lenders who work with people that have shaky credit. These connections open doors for even greater credit score improvement.

Count on a Hard-Working Cook County Lawyer

No matter what kind of financial problem you are having, there’s a way out. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. We routinely handle matters throughout the Prairie State.

Source:

debt.org/bankruptcy/how-will-filing-bankruptcy-impact-my-credit-score/