Check your credit report after your case is closed
There’s two good sources to get your credit reports for free. AnnualCreditReport.com is a website set up to require the three credit bureaus (Experian, Equifax, and Transunion) to provide an individuals full credit report. As the name suggests, you can only get a copy of your report once per year. However, during the Covid-19 pandemic they are allowing for weekly access. Another place is CreditKarma which I’m not a huge fan of since it does not give you a full credit report and they also spam you with credit card offers which are paid advertisements from the credit card companies themselves. But CreditKarma will also point out exactly what is adversely affecting your credit so that can guide you in what to work on.
It is also important to make sure that your credit reports are accurately reflecting the bankruptcy. These debts should show that the debt has been discharged. We often see that debts that have been discharged that are still being reported as ‘past due’. It sometimes takes a few months for the credit reports to catch on that your bankruptcy is discharged and closed. So give it a little time and if you see anything that looks incorrect, send us your credit reports and we’ll see what we can do..
Start with a secured card
Even if your credit has improved during or immediately after bankruptcy, you might not want to jump to a big purchase like a car or house. Even with a good credit score, you might find lenders who will hit you just due to the recent bankruptcy filing. A lender who actually knows a little bit about bankruptcy law will probably be a little easier, since someone post-bankruptcy is actually a good credit risk. If you’ve just received a Chapter 7 discharge, then: 1) your other debts have been wiped out which makes it easier to afford a new debt payment; and 2) you cannot file another Chapter 7 for 8 years to get out of an affordable loan. I’ve had clients tell me that they’ve had some moderate success with certain dealerships and “car brokers”.
A better place to start would be a secured credit card. A good place to find a secured card is NerdWallet which will show you the terms upfront. Based on a statement on their website, the credit card companies do not pay for these reviews. This is where you go to a bank and have them hold a deposit which will be your credit limit. Since the bank does not have to worry about a loss since they can just apply those funds if you do not make payments, these are given out pretty freely. After a short history of making full and timely payments on this card, you can either ask them to unsecure it or you can apply for an unsecured card.
Pick a good unsecured card
After you’ve built up a little credit, you can look into an unsecured card with a higher credit limit to last you through the month. If you are looking around the internet for a good credit card, the internet will notice this and you will start receiving advertisements popping up all over the place. Just like the credit card offers that pop up on Credit Karma, these are also paid advertisements and should be ignored. A good place to go for an unsecured card is also NerdWallet.com.
Get help from someone with good credit
If someone adds you as an authorized user on their credit card and they have good credit, you will get a boost from their usage of that card. In fact, you don’t even need to use the card at all in order to reap the benefits of that. If you have family or friends who have good credit and want to help you out, ask that they add you as an authorized user to their cards. Unless you are going to be using that card, you can simply cut it up and toss it away.
Budgeting
This is an obvious one, but it’s also the most difficult. If you’ve gone through a Chapter 13 bankruptcy, you already know quite a bit about budgeting to make plan payments. The best way to create and stick to a budget is to use an app where you can make a budget, easily enter transactions, and you can then see how your actual budget stacks up to your goal budget, and possibly make adjustments. NerdWallet and Wirecutter have some good suggestions.
If you follow these steps and take a cautious approach to your financial situation, your credit should be able to bounce back from bankruptcy a lot quicker that you would expect.
