Category Archives: credit report

Rebuilding Financial Strength: A Guide to Elevate Your Credit Score Post-Bankruptcy

Leave a reply

Introduction

Congratulations! You’ve successfully navigated the complex waters of Chapter 7 or Chapter 13 bankruptcy, and now it’s time to rebuild. Your credit score may have taken a hit, but with strategic and mindful steps, you can set the stage for a strong financial comeback. In this guide, we’ll explore effective strategies to elevate your credit score after emerging from bankruptcy, unlocking new opportunities for financial well-being.

Understanding the Post-Bankruptcy Landscape

Post-bankruptcy, your credit score may be lower, but it’s not a life sentence. It’s a starting point for a new financial chapter. Let’s dive into practical steps to rebuild and improve your creditworthiness.

Step 1: Assess Your Credit Report

Begin by obtaining copies of your credit reports from major bureaus – Equifax, Experian, and TransUnion. Scrutinize the reports for accuracy, ensuring that all discharged debts are appropriately marked as “included in bankruptcy.” Dispute any discrepancies you find.

Step 2: Craft a Comprehensive Budget

Develop a realistic budget that aligns with your financial goals. Prioritize debt repayment, allocate funds for living expenses, and set aside savings. Utilize budgeting tools to gain insights into your financial habits and make informed decisions.

Step 3: Establish an Emergency Fund

Build a financial safety net by establishing an emergency fund. Aim to save three to six months’ worth of living expenses. Having this reserve prevents the need for relying on credit in times of unexpected expenses.

Step 4: Secure a Secured Credit Card: Rebuilding credit often involves demonstrating responsible credit use. Obtain a secured credit card, make small, manageable purchases, and consistently pay off the balance. This showcases your ability to handle credit responsibly.

Step 5: Explore Credit-Builder Loans: Credit-builder loans provide an opportunity to rebuild credit while simultaneously saving money. Make regular payments into a savings account, and once the loan is repaid, receive the accumulated funds.

Step 6: Strategic Authorized User Status: Become an authorized user on a creditworthy friend or family member’s account. This allows positive aspects of their credit history to reflect on your report, aiding in the improvement of your credit score.

Step 7: Diversify Your Credit Portfolio: A well-rounded credit portfolio positively influences your credit score. Consider a mix of credit types, including credit cards, installment loans, and retail accounts. Manage these accounts responsibly to demonstrate financial stability.

Step 8: Monitor and Celebrate Progress: Regularly monitor your credit score using reputable credit monitoring services. Celebrate small victories and milestones along your journey to a better credit score. Adjust your strategy if needed and stay committed to long-term financial health.

Conclusion: Emerging from bankruptcy is not the end but the beginning of a financial rebirth. By implementing these steps, you lay the foundation for a healthier credit score and a more secure financial future. Remember, the path to credit recovery is a marathon, not a sprint. Stay committed, stay informed, and watch your credit score rise, opening doors to new opportunities. Your financial comeback story starts now!

Schedule a free bankruptcy consultation with Jennifer Weil, a New Jersey bankruptcy attorney, to discuss your options.

The Impact of Chapter 7 Bankruptcy on Credit Scores

Leave a reply

Introduction

Chapter 7 bankruptcy is a legal process designed to provide individuals and businesses with a fresh start by liquidating non-exempt assets to pay off creditors. While it offers relief from overwhelming debt, there are significant consequences, particularly in terms of credit scores. This article explores the complex relationship between Chapter 7 bankruptcy and credit scores, shedding light on the short-term and long-term effects, as well as strategies to rebuild credit post-bankruptcy.

Immediate Impact on Credit Scores

Upon filing for Chapter 7 bankruptcy, the debtor’s credit score typically experiences a sharp decline. The bankruptcy entry itself remains on the individual’s credit report for ten years, affecting their ability to secure new credit or loans. Creditors view Chapter 7 as a serious negative event, as it implies an inability to repay debts as agreed.

However, it’s crucial to recognize that individuals considering Chapter 7 bankruptcy often already have severely damaged credit due to late payments, defaults, and high levels of debt. In some cases, bankruptcy might be the best option for a debtor to break free from an unsustainable financial situation.

Long-Term Credit Score Rebuilding

While Chapter 7 bankruptcy can have a profound initial impact on credit scores, its long-term effects are not as dire as one might assume. Over time, the negative impact on credit scores tends to diminish, especially if the debtor takes proactive steps to rebuild their credit responsibly.

Here are some key factors that influence the recovery of credit scores post-Chapter 7 bankruptcy:

  1. Debt Discharge:
    • Chapter 7 discharges most unsecured debts, allowing individuals to start fresh without the burden of overwhelming financial obligations.
    • This can create a foundation for responsible financial behavior moving forward.
  2. Rebuilding Credit Responsibly:
    • Obtaining new credit after bankruptcy is challenging, but it’s not impossible.
    • Securing a secured credit card or a credit-builder loan can be instrumental in rebuilding credit. Timely payments -in full – on these accounts can positively impact credit scores.
  3. Credit Counseling:
    • Participating in credit counseling programs can demonstrate a commitment to financial responsibility.
    • Some credit counseling agencies offer educational resources to help individuals manage their finances more effectively.
  4. Timely Bill Payments:
    • Making timely payments on remaining obligations, such as mortgage or car payments, does not usually contribute positively to credit scores if those obligations existed prior to your bankruptcy case.
    • The key is to obtain new, post-bankruptcy accounts and to pay those bills on time and in full each and every month.
    • Establishing a history of on-time payments is crucial for rebuilding credit.
  5. Patience and Persistence:
    • While the bankruptcy entry remains on the credit report for ten years, its impact lessens over time.
    • With responsible financial behavior, individuals can see gradual improvement in their credit scores.

Conclusion

Chapter 7 bankruptcy undoubtedly has a significant and immediate impact on credit scores. However, it is not a permanent scar, and individuals can take steps to rebuild their credit over time. By adopting responsible financial habits, participating in credit counseling, and strategically obtaining new credit, individuals can navigate the post-bankruptcy landscape and work towards a healthier financial future. Ultimately, the decision to file for Chapter 7 bankruptcy should be made after careful consideration of one’s unique financial situation and with a clear understanding of the potential consequences on credit scores.

Schedule a free bankruptcy consultation with Jennifer Weil, a New Jersey bankruptcy attorney, to discuss your options.

Are You Considering Debt Adjustment in NJ? Read This First!

Leave a reply

If you’re struggling with debt in New Jersey, you may have heard about debt adjustment as a way to get relief. Debt adjustment, also known as debt settlement, is a process where you negotiate with your creditors to settle your debts for less than you owe. However, it’s important to understand the laws around debt adjustment in New Jersey before deciding if it’s the right choice for you.

First, it’s important to know that debt adjustment companies are required to be licensed by the New Jersey Department of Banking and Insurance. These companies must follow specific regulations and guidelines to ensure that they’re acting in the best interest of their clients. It’s crucial to research and choose a licensed debt adjustment company to ensure that you’re working with a reputable organization.

Second, it’s important to understand the fees associated with debt adjustment. While debt adjustment companies can only legally collect their fees once they’ve successfully settled your debts, many of them charge high fees along the way that may not be adequately disclosed up front.

Third, it’s important to know that debt adjustment companies can’t guarantee that they’ll be able to settle your debts. It’s important to have realistic expectations and understand that settling your debts can take time and may not be possible in every case. These companies also cannot protect you from debt collection lawsuits.

Finally, it’s important to consider the potential impact on your credit score. Debt settlement can have a negative impact on your credit score, and it’s important to understand the consequences before deciding to pursue this option.

In conclusion, debt adjustment can be a viable option for debt relief in New Jersey, but it’s important to understand the laws and regulations surrounding this process. Working with a licensed debt adjustment company and having realistic expectations can help ensure a positive outcome. If you’re considering debt adjustment as a solution to your debt problems, consult with an experienced debt relief attorney to discuss your options and determine the best course of action for your specific situation.

Schedule a free telephone appointment to discuss your unique debt situation with attorney Jennifer Weil at my Setmore page.

How To Rebuild Your Credit After Bankruptcy

Leave a reply

What’s the best way to rebuild my credit after my bankruptcy case is over? Many people are afraid to file for bankruptcy due to the perceived impact on their credit. Truth be told, a lot of people who need bankruptcy already have bad credit and a bankruptcy isn’t going to worsen their credit that much more.

The real reason that people fear credit damage through bankruptcy is that they are afraid of permanent, or semi-permanent, credit damage because a bankruptcy stays on your credit report for ten (10) years. When someone hears that a bankruptcy filing stays on their credit reports for 10 years, they think that the record of their bankruptcy filing is somehow going to outweigh anything good that could happen to their credit after the bankruptcy.

In my experience and in my clients’ experience, bankruptcy does not permanently damage credit. The is an immediate impact to a credit score – a bottoming out, if you will – but if you play your (credit) cards right, there’s nowhere for your credit to go but up after a bankruptcy. There are effective steps that you should take to deliberately improve your credit after bankruptcy.

What You Shouldn’t Do After Bankruptcy

First, you should be aware of some things to avoid after bankruptcy:

  • Don’t overuse new credit cards;
  • Don’t take out business loans you can’t pay;
  • Don’t ignore new credit card offers; and
  • Don’t pay too much in credit card fees.

Believe it or not, there are things that you can do to your credit after bankruptcy that will only make your credit reports look worse, or that will inhibit your ability to rebuild good credit after bankruptcy.

Don’t overuse new credit cards: Most of my clients are pleasantly surprised that they can qualify for new credit card accounts after their bankruptcy case has ended, since they previously believed that they would never qualify for another credit card. But be aware that you don’t want to start charging up your new credit cards to their limit. Instead, only charge a monthly amount that you can easily afford to pay back.

Don’t take out business loans you can’t pay: This is a tough one, because most people want to get on with rebuilding their financial lives as soon as possible after bankruptcy, which includes building their business back to financial health. And it can be hard to know what you might be able to afford to repay. This is where good accounting help or financial advising is invaluable. Ask around for advise from people whose financial judgment you trust; is your business really pulling down the amounts of money that will enable you to repay a business loan? Be a penny-pincher for awhile. Build the business on a shoestring. It’ll give you the opportunity to test the waters and see if your business can stay afloat.

An interesting thing about business loans, or even business credit cards, is that they don’t always report to your personal credit reports. So you might consider business loans to be a net neutral when it comes to your credit. But remember, we are talking about your overall financial health, which your credit reports reflect – if you dig in too deep with business loans that you can’t afford, it’s likely to impact your personal financial health, which is likely to negatively impact your personal credit over time.

Don’t ignore new credit card offers: If you don’t care about rebuilding your credit and you’ve decided that you don’t like banks, then go ahead and ignore the new credit card offers that come your way after bankruptcy – your credit will stagnate. But if you want better credit, you have to work for it, and that means taking out new credit cards.

Don’t pay too much in credit card fees: If you don’t need to pay fees for something, don’t. For many people, annual fees just add on to credit-card debt, making it that much harder to pay.

What You Should Do After Bankruptcy

As you may have figured out by now, the best and fastest way to rebuild a good credit record after bankruptcy is to take out new credit-card accounts. Paying off the full credit-card balance on time each and every month is the safest and most effective way to accomplish improved credit. Only charge the amount that you can easily pay off in full at the end of every month.

After you’ve done this for a few months, pull your credit report from annualcreditreport.com and make sure that this new credit card account – and your monthly payments – are being reported. This is the goal of building new credit: To have positive, in-good-standing accounts consistently reported on your credit reports. If it’s not reporting to your credit, don’t continue to use it and try again with a new account.

Remember, debit card usage will not count as a credit account for credit reporting purposes. It needs to be a credit-card account. You can try a secured card, if that’s the best kind of card account for which you can qualify. Just make sure that you keep enough in the bank account to which the card is linked to pay off the card account in full without overdrawing your bank account.

If you are careful and you pay attention to what you are doing, your credit should improve over time. As you qualify for new and better credit offers, you should take the ones that look best to you (think no, or low, annual fees and higher credit limits). Switch your charging – and your paying off the full balance every month – over to the new account to continue rebuilding your credit. Higher limit cards tend to “look better” on your credit report.

Check Your Income

Obviously, before you take out new credit, you should make sure that you are in a position to be able to afford to pay off any credit card balance in full each and every month. That means you need a source of regular income that can first pay your regular monthly bills – rent, electric, food, etc. – and leave enough money left over to pay your credit card account in full.

Do not put the cart before the horse and get all worried about rebuilding your credit before you have enough income to do so! Worry first about employment and then about credit. Most job fields do not care that you have bad credit before they hire you. There are a few fields where employers do care about bad credit, and it’s highly likely that you’ll know for sure if you are in one of those fields.

If you need to discuss issues with a bankruptcy attorney, schedule a free bankruptcy phone consultation with attorney Jennifer N. Weil through her Setmore page.

How To Increase Your Credit Score After Bankruptcy

Leave a reply

So many people who are in debt are concerned about the impact of bankruptcy on their credit reports that they hesitate to file for bankruptcy. People are afraid that their credit will never recover from bankruptcy, especially since they know that a bankruptcy will be on their credit reports for ten years.

Does Bankruptcy Ruin Your Credit?

Because of the common view that bankruptcy ruins credit, I started paying attention to the post-bankruptcy credit reports of my clients, especially those clients who had gone through a Chapter 7. I started asking them to tell me about what credit offers they received, if any, right after their bankruptcy case ended. If they took those new credit offers, I wanted to hear what the freebie credit score estimators like Credit Karma (ad) said about their credit scores.

Surprisingly, these clients mostly received offers of new credit right after their Chapter 7 bankruptcy case was over. The offers were not great – often, they were for secured credit card accounts with low limits – but the point here is that my post-discharge Chapter 7 clients were receiving unsolicited offers of credit.

Not all of these post-bankruptcy clients accepted offers of new credit. When these clients checked their credit reports months after their bankruptcy cases were over, there was virtually no change. Their credit scores of those who had not accepted new credit offers had taken a hit from the bankruptcy itself, but then those scores hadn’t changed.

Steps To Improving Your Credit

However, there was significant improvement in the credit scores of post-bankruptcy clients who had accepted and used offers of new credit. The elements of building back up your credit score are key:

  • Clear out the bad debts from your credit reports (hint: debt settlement often doesn’t help);
  • Then accept offers of new credit – don’t go overboard here, because next…
  • You’ll need to use the new credit accounts, so don’t charge any more than you can easily pay off, in full and on time, each and every month. Even if you only charge $20 a month, that’s fine;
  • As your credit improves, accept the new, better credit offers that you receive;
  • Keep paying off your credit cards in full and on time every month.

After you’ve used bankruptcy to clear out your old, bad debts, you would use the above method to build your credit score back up.

How Debt Settlement Affects Your Credit

The above process is usually much faster than debt settlement, since debt settlement involves paying large amounts to creditors over time and then waiting 7 1/2 years for those bad debts to fall off your credit reports. The timeline may not matter for people whose bad debts have already fallen off their credit reports, but unless you fall into that category, you may want to speed things up.

Looking for bankruptcy help? Make a telephone appointment with attorney Jennifer Weil at (201) 676-0722. Or you can schedule your own phone appointment here.

Film Review of Spent: Looking For Change

Leave a reply

A recent documentary available on YouTube highlights the high cost of being poor.  Spent: Looking For Change, a film sponsored by American Express, explores the financial lives of people who lack access to banks or who have bad credit or no credit.  Here is a basic summary of the important topics covered:

According to the film, approximately 70 million Americans lack access to the traditional financial system.

Why don’t these people have access to banks or to credit?  For a variety of reasons – medical problems resulted in lost income, bad financial decisions were made, etc.  Then bank accounts were overdrawn and eventually closed.  Once debts have gone unpaid, credit gets ruined and it’s hard to fix, even where there is currently a good income and all monthly bills are being paid.  Where a person has large student loans relative to their income, their credit is weakened.  Or those who have never had a credit card or taken out a loan are invisible to the credit reporting agencies and have no available credit.

When people lack access to the traditional financial system, they often turn to check cashing businesses, payday loans, and title loans in order to make ends meet.  These types of financial products cost more in fees and interest than traditional products.  The film tells us that Americans spend about $89 billion a year on fees and interest.

When people don’t have a bank account or a debit card, they must physically go around and pay monthly bills, which costs a lot in terms of gas and time.  Even prepaid debit cards that are funded with cash carry large costs in fees charged for buying and using the card.

People turn to payday loans, which are designed to be paid back on the next paycheck; and title loans, which are loans that use your car for collateral.  If you don’t pay the loan, they take your car.  Many will pay the fee over time instead of paying the original loan off because they can’t afford it.  The original loan is never paid off.

My take on the film is that it is a good overview of how financial products that are designed to take advantage of poor people actually set them farther and farther back.  It’s worth watching because it’s an unbiased presentation of a lot of information in only about 40 minutes.

 

Using credit reports in bankruptcy

Leave a reply

If you are considering a bankruptcy filing but you are concerned because you don’t remember which credit card companies you owe and/or exactly how much you owe them all, what do you do?

First, don’t worry. Remember – most, if not all, of your debts are on file somewhere – in your consumer credit reports. It is possible to pull your credit report from each of the three main consumer credit reporting agencies and find out what your creditors have reported with regard to what, and whom, you owe. These three agencies are Experian, Trans Union, and Equifax.

But what if you think you already know exactly who you owe and how much you owe them, prior to filing for bankruptcy? It is still a good practice to pull your credit reports before you file, anyway.

You should pull your credit reports because you may have forgotten a debt, a creditor may be reporting that you owe more than you think you do, and/or one or more of your debts may have been sold to a debt buyer without your knowledge. This is just a good due diligence practice.

The official site for free credit reports from all three credit reporting agencies is annualcreditreport.com. You don’t need to use the ones you see advertised on TV – they will cost you some money, possibly every month. So watch out what services you might be signing up for when you are surfing the net looking for credit report sources.

If you are going to hire an attorney to help with the bankruptcy, speak to that attorney first before you go to the trouble of pulling the reports, unless you just want to see them anyway. The attorney may already have a credit reporting service they want to use. Tell the attorney that you want a copy of the credit report they pull for you. Or, they may want you to pull your own reports first, before starting on your bankruptcy case. Different lawyers go about the preparation of a bankruptcy case in different ways.

Photo by Adam Baker.

How long does a bankruptcy stay on your credit report?

1 Reply

Bankruptcy filers who would like to rebuild their credit are justifiably concerned about how long a bankruptcy can appear on their credit report.

The answer is that bankruptcy information can stay on your report for 10 years. Most other types of negative information can be reported for 7 years.

Usually, a Chapter 7 stays on a credit report for 10 years while a Chapter 13 stays on a report for 7 years.

The Federal Trade Commission has a website explaining how to get free copies of your credit reports from the 3 major credit reporting companies. You should check your reports on a regular basis to make sure they do not contain any false information.

It is still possible to build a positive credit report even with a bankruptcy on your record, so long as you act carefully and methodically. If you’ve ever received credit card offers before, you are likely to receive them again after your bankruptcy.

If your goal is to build good credit, it’s worth your while to consider the post-bankruptcy card offers that you receive with an eye toward building a record of consistently and fully repaying an open line of credit.

If you are in New Jersey and considering Chapter 7 bankruptcy, please call me for a free telephone consultation at 201-676-0722.