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How To Salvage Your Credit Score After Bankruptcy |Graylock Advisors

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Are you aware that over 500,000 U.S. citizens declare bankruptcy annually?

Bankruptcy is one of the most damaging things that can happen to your credit rating. Mainly because a bankruptcy filing usually stays on your credit report for up to 7 or 10 years, there are different types of bankruptcy so it depends on which has been filed. Yet, filing bankruptcy is sometimes a necessity, learn why...

Filing Bankruptcy Can Serve a Purpose

Even though both Chapter 7 and Chapter 13 bankruptcy carry significant consequences along with them, that doesn't mean that they can't help your specific situation. Based upon your personal circumstances, filing for bankruptcy might be the best choice to solve your family's financial quagmire.

For example, let's say you have a great deal of medical debt that you don't have any realistic possibility of paying.

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Medical Debt Is Crushing Americans

In cases like this, filing for bankruptcy can help you solve the situation sooner.

As opposed to continuously making late payments as you struggle for years on end, you can make your debt more manageable.

The #1 reason for deciding to file bankruptcy — Chapter 7, Chapter 11 or Chapter 13 — is to receive an automatic stay! Filing for protection under any chapter, barring a few outstanding exceptions, instantly halts all ongoing legal actions against you automatically, including telephone calls from collectors, lawsuits, foreclosures and wage garnishments.

Listed below are a few situations where bankruptcy may be a viable solution...

  • Your home is about to be foreclosed on.
  • You've moved to a new state with less favorable exemptions.
  • Your vehicle is about to be repossessed.
  • You are in danger of being evicted.
  • You want to halt a lawsuit against you.

Your Credit Score CAN Recover - Graylock Advisors

One advantage of having wise financial advice from establishments like Graylock Advisors is that you quickly will learn the ins-and-outs of navigating in the world of debt, finance, and credit.

And one great thing about credit is that you can change it for the better with your own responsible actions.

Your credit score is supposed to show future lenders how effectively you handle your payments at any given time. Even in the case that you've handled your credit badly in the past, that might not always be true currently or in the future. With some time and hard work, you can recuperate from bankruptcy.

But where do you start when it is time to rebuild your credit rating after bankruptcy? Here are the steps to take...

Check Your Own Credit Reports For Clerical Errors

It would be wise to pull your credit reports from three credit bureaus -- Experian, TransUnion, and Equifax -- to confirm that all delinquent accounts are removed. (You can get one free report per agency each year in AnnualCreditReport.com.)

Any affected accounts must indicate they were "included in bankruptcy" and must show no past due amounts, balances, or late payments following the bankruptcy filing or discharge date.

Because you'll need to wait for your updated credit reports after filing, here is when to check:

  • For Chapter 7 bankruptcy: Check 90 days after your bankruptcy filing
  • For Chapter 13 bankruptcy: Check 90 days after your bankruptcy discharge (which may take 3 to 5 years)

If you encounter errors on your credit report, you will have to dispute the errors directly with the respective credit reporting bureaus.

When your bankruptcy is finished, every account included on your filing must say "discharged" or "included in bankruptcy"

If you see anything else from your account status area for any of the accounts, then it's most likely a mistake and it ought to be corrected.

Including statuses such as,"current", "active","delinquent", or "charged-off."

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If you find errors on your credit report, dispute them directly with the credit bureaus.

Try Getting Bankruptcy Removed From Credit Report

Many people don't know that removing a bankruptcy from your credit report is an option. The credit bureaus have active campaigns on the internet to make you believe that it's not feasible.

They do not say it outright, but the way they word their interpretation of the FCRA makes people believe that it can not be done. Rest assured though, it can.

When disputing a bankruptcy, you can not file a dispute with only one of the credit report agencies and expect it to apply to all 3. Be aware that you'll need to file three individual disputes with Experian, Equifax, and TransUnion.

Completing the process of disputing a negative item on your credit report on your own is entirely possible, yet, it is still a lengthy and tedious procedure that does not guarantee 100% success. Some succeed and others fail to get the bankruptcy removed.

Stay Current With Your Current Financial Obligations

Filing bankruptcy doesn't necessarily mean eliminating all debt. Some loan types, especially secured loans, can survive the bankruptcy because the creditor is entitled to at least the value of their collateral. These are generally called reaffirmations.

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Usually, a reaffirmation survives the bankruptcy with the very same conditions the loan had from the beginning.

Consequently, if you have an auto loan when you file a Chapter 7 and you want to keep the vehicle, you will need to keep on making the payments as spelled out in the loan documents.

Since this debt is reaffirmed, or not discharged, the lending institution will continue to report the debt and your handling of the debt every month to the credit reporting bureaus.

Reaffirmations can work wonders for rebuilding a credit rating. However, they will only work in your favor if you make timely payments.

A Secured Card Can Build Credit After Bankruptcy

With a secured credit card, the issuer doesn't take on the chance of you overspending and not paying your invoice. You have to give the card issuer money upfront, much like a security deposit, and the spending limit on your secured card is typically restricted to the amount of your deposit.

A secured credit card can be a wise way to build your credit after bankruptcy. You can not really get into trouble, as your spending is limited to a deposit. With a secured card a few times a month, and then paying the whole bill each month will begin to increase your payment history which accounts for 35% of your FICO® scores calculation.

When you find a secured credit card deal, confirm with the card issuer your payment history will, in actuality, be reported to the credit reporting agencies.

Maintain Your Patience & Prove Yourself

Realistically, you can't expect a perfect credit score with a bankruptcy noted on your report, and as stated earlier, that takes seven or ten years from the date of filing to fall off.

Fortunately though, according to FICO, the older your bankruptcy is, the less impact it has on your score.

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So this means that even three or five years out from your bankruptcy filing, your credit score can be greatly improved over what it is as of today.

If you were having financial disaster pre-bankruptcy, you may even find yourself in better financial positioning than you were before you filed bankruptcy.

Just make sure that you continue to take financially-responsible steps – like using credit responsibly, maintaining $0 balances, and making payments on time.

As you follow through on these steps, your financial responsibility will shine through. And, eventually, you’ll move past that bankruptcy and be on your way to a credit score you can be proud of.

Looking For Alternatives To Bankruptcy? Contact Graylock Advisors...

If you are looking for sound, practical financial advice, make your way over to Graylock Advisors.

Please call them toll-free at 800-317-8835 if you have any questions regarding low-interest rate credit card debt.


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