A Chapter 7 bankruptcy can be an effective remedy for people who are struggling with overwhelming debt. A bankruptcy filing initially hurts your credit score, but once you’ve received your discharge of debt, you can start to repair your credit score.
A Chapter 7 stays on your credit report for 10 years. However, the impact on your credit score steadily decreases over time. You can speed the credit-rebuilding process by taking certain positive actions, including the following:
- Check your credit report — Get a copy of your credit report from each of the three major credit bureaus: Equifax, Experian and TransUnion. If you find any errors in the reports, dispute them with the credit bureaus immediately.
- Monitor your credit score — It’s important to track your progress. There are a number of free online services that offer credit score tracking. Some credit card companies let you check your credit score for free. If you’re making regular payments on expenses like rent or utilities, you might be able to have those payments reported to the credit bureaus.
- Practice responsible credit habits — This means making all of your payments on time and in full and keeping your credit utilization ratio low. Credit utilization makes up 30 percent of your total credit score. Also, create a budget and stick to it, avoiding overspending.
- Get a secured credit card — This type of credit card requires you to make a cash deposit, which also acts as your credit limit. Once you’ve built up some positive credit history, you might be able to qualify for a regular, unsecured credit card.
- Take out a credit-builder loan — A credit-builder loan is a small loan specifically designed to help people build or rebuild their credit. You typically make small, monthly payments for a period of six to 12 months.
- Try to obtain a co-signer — A friend or family member can act as your guarantor on a loan or lease agreement. Since they become responsible for the loan balance if you fail to make the payments, it’s important that your co-signer be able and willing to take on this role.
- Become an authorized user — You can ask a friend or family member with good credit to add you as an authorized user on their credit card account. However, you’ll be responsible for any charges you incur.
Your bankruptcy attorney may advise you about other actions you can take to repair your credit score. By following these tips, you may start to see improvements in your credit score in as little as one to two years after your bankruptcy discharge.
Jeff Field & Associates provides clients throughout Georgia with assistance in bankruptcy and debt relief. We have offices in Athens, Scottdale, Douglasville, Marietta, Gainesville and Lawrenceville. To schedule an appointment, call us at 404-381-1278 or contact us online.