After years of struggling to pay your bills during the recent recession, you found yourself facing a mountain of debt and unable to keep up with your payments. You sought relief from harrowing creditors by filing for Chapter 7 bankruptcy. But now you have a black mark on your credit and you are unsure how to rebuild your credit after bankruptcy.
After filling bankruptcy, it will show up on your credit report and remain for many years. Chapter 7 bankruptcy will remain on your credit for ten years after filing, while Chapter 13 will remain for seven years. Despite this, you are more likely to be eligible for credit after filing Chapter 7 bankruptcy than before you filed. This is because the discharge of debt you receive under Chapter 7 immediately improves your debt-to-income ratio, which is something that future lenders will consider. In addition, lenders are aware that after filing Chapter 7 Bankruptcy, you will not be able to file again for another 8 years, which makes you less of a credit risk.
So the good news is that after filing Chapter 7, you may find yourself receiving many credit applications in your mailbox. The downside is that these credit offers will carry high (sometimes extremely high) interest rates. This being said, you have to start somewhere and if you use this credit as a tool for rebuilding your credit, rather than as everyday financial resources, it can be of assistance to you.
The best way to rebuild your credit after bankruptcy is to establish a new line of credit with a credit union. This will certainly not be the easiest thing to accomplish but when you do, it will carry a lot of weight future lenders. Credit unions will give you much better interest rates and many of them have special programs to help individual rebuild their credit. Furthermore, lenders look upon this type of credit more favorably, so your credit score will improve faster.
Credit unions can also offer you secured credit cards. These are credit cards that are secured by money you have deposited in an account with the credit union. For instance, you deposit $500 and are given a $1000 credit limit to be drawn upon as long as your loan balance is less than your deposit. Typically, if you have been paying your bills on time, after a year or two you will be eligible for an unsecured credit card with a higher credit limit and even lower interest rates. Traditional banks also offer secured credit cards, but usually with much higher interest rates, so get one through a credit union if at all possible.
Free Consultation: Oklahoma City Bankruptcy Lawyer
No matter how you decide to reestablish your credit, it is important to start immediately after bankruptcy and to make your payments on time. Rebuilding your credit after Bankruptcy will take time and patience, but if you can show lenders that you have established new payment habits, it won’t be very long before you are again eligible for traditional auto and home loans.
To find out more about how to successfully file bankruptcy in Oklahoma, contact a Oklahoma City bankruptcy attorney. For a free confidential consultation about your rights in bankruptcy court and the potential benefits of filing bankruptcy, contact the Debt Line Law Office at (918) 878-0010. If you prefer e-mail, send us your question using the form at the top right of this page and we’ll answer your question as soon as possible.