In this below article we will discuss about how to repair your credit after filing chapter 7. Chapter 7 gives you the relief of a clean financial slate, but also the worry of never having decent credit again. Although chapter 7 stays on your credit reports for up to 10 years. Its impact on your score will lessen over time. In fact, your credit score after chapter 7 may not be as bad as you think. You may have a higher credit score a year after chapter 7 than before you filed because you stop fighting an impossible battle and start rebuilding. If you were eligible to file for bankruptcy either Chapter 7. The most common type, or Chapter 13, your credit may already be ruined. But you can restore your credit right away by offsetting negative information on your credit report with something more positive.
Make sure your credit report is accurate
You may think you don’t want your chapter 7 to show up on your credit report. But it’s much better than showing unpaid and delinquent balances. Instead, your credit report should show a $0 balance for any account discharged through chapter 7. It’s not uncommon for creditors to continue to report negative account information even after you’ve been discharged from chapter 7. So it’s important to review your credit report regularly. It may cost you a few bucks to review every few months. But it’s money well spent, and you’re entitled to a free credit report every year. If any of your canceled debts are shown to be active submit a dispute to the credit bureaus to bring the account up to date.
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Make your other payments on time
Not all of your accounts will be included in your bankruptcy. Student loans are generally not dis chargeable. Any accounts that are still active will affect your score, so be sure to pay off existing loans on time. Don’t ignore accounts that aren’t on your credit report, either. These could eventually be reported, especially if you fall behind on your payments. Your goal is to show your creditors that your financial problems are behind you and slowly build your credit score over time.
Choose credit repair wisely
You will see many advertisements for credit repair companies that say they can remove chapter 7 from your credit report. Beware of any company that guarantees chapter 7 removal. If your chapter 7 report is correct there is nothing these companies can legally do for you that you cannot do for yourself.
Consider a co-signer
Having a family member or friend sign with you can help you qualify for better cards or loans and build your credit faster. If you have a willing co-signer, you should keep track of unexpected payment In the future, and not just for your own benefit. If you miss or are late on a single payment, this information will be provided to your co-signer’s credit report and to your own credit report.
Make your new credit card payments on time
The two most important things that help your credit score are on-time and positive payments. When you get a new credit card, whether it’s secured or unsecured, make sure you make your payments on time each month. Better yet, pay off your balance in full to avoid getting into debt trouble again. As long as you’re more than 30 days late on a payment, it can show up on your credit report and stay there for seven years. Add that to the chapter 7 filing that’s already looming, and your solvency case becomes that much harder to make.
Keep your balance low
Consumers with the best credit scores keep their credit card balances low. You’ll want to keep your balance at or below 30% of your credit limit to show that you’re managing your credit well. Less than 10 percent is even better, especially when rebuilding your credit.
Your credit score after chapter 7
Before you file for chapter 7 , make sure you’ve done everything you can to pay off your debt, including: a very strict budget; take a second job or work for yourself or for hire; sell assets; consult a nonprofit debt counselor. Have you been there and done that? Okay. Get ready. If you choose to file for chapter 7, the damage to your credit score depends on a number of factors, some of which are nearly impossible to predict.
This is true depending on the type of chapter 7 you file, Chapter 7 (debt discharge) or Chapter 13 (debt reorganization; getting into a payment plan), your score will likely drop between 160 and 240 points. Ironically, lower credit scores tend to lose fewer points before chapter 7 than much higher credit scores. An eight-year FICO study showed that a person with a credit score of 680 lost 150 points and a person with a credit score of 780 lost 240 points. The drop places both individuals in the same unattractive neighborhood of 530-540. In short, consumers with better credit histories have more to lose; those with lower credit scores already have many of your financial problems on their record.
Steps to Rebuild Credit After chapter 7
You may think you’re an outcast in the eyes of lenders and credit card issuers, but that’s not entirely true. You’ll have to prove yourself, of course, but it can be done. While your goal (building a good credit score) is the same as someone starting from scratch, your situation is different. Your problem is not that creditors know nothing about you, but that they know a lot. Here’s how you can rebuild your credit after chapter 7
1. Check your credit reports
Your credit scores are calculated using information from your credit reports, so any inaccurate negative information can make it even harder for you to get out of debt. If you find errors, discuss the errors on the credit reports and correct them. Of course, there will be negative information that is accurate. Bankruptcy erases or reorganizes debts, but it does not erase your clean credit reports. Your bankruptcy filings will show Chapter 7 for 10 years, or Chapter 13 for 7 years. Late payments and debts that go to collection remain on the reports for up to seven years after delinquency.
2. Check your credit score
It’s smart to track your credit score from month to month, and it’s essential to look at the same score each time. Otherwise you will end up comparing apples to oranges which are not helpful. Pick one type of score to track and stick with it.
3. Find a credit product for your situation
Your pre-bankruptcy payment history will make you appear to be a particularly risky borrower to lenders. You can solve that problem by providing additional guarantees that they won’t lose money by lending you. Here are some credit products designed to do just that, as well as other ways to improve your financial profile.
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