Credit Repair

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The key to your future purchasing power after a bankruptcy will be your credit rating.  The way you rebuild your credit greatly will influence whether your rating remains low, increases slowly over time, or increases rapidly over time. 

The best starting point for the repair process is your credit report itself.  The three credit reporting agencies in this country are: 

• Experian (1-888-EXPERIAN or www.experian.com)

• Equifax (1-800-685-1111 or www.equifax.com)

• TransUnion (1-800-916-8800 or www.tuc.com)

Your credit report tells you what information prospective creditors will see when you apply for credit.  Credit reports also are used by potential employers and some auto insurance companies, so your report should be as accurate as possible.  

Starting March 1, 2005, federal law entitles you to one free copy of your credit report annually. An annual review of your credit report will help you determine its accuracy.  If you find any errors, write to the credit bureau you received the report from and tell them what information you dispute.  Follow up in a couple of months to make sure they have corrected the information.  If you dispute something in writing, the credit bureau has to check the information and they will remove it if their investigation proves you were right. 

The credit bureau may not accurately reflect your most recent discharge; therefore, you should send them a copy of your discharge notice and the schedule of creditors.  Furthermore, you may want to inform the credit bureaus of the following information (the credit bureau does not have to add this information but often will): 

            • Current employment

            • Current residence

            • Current phone number

            • Date of birth

            • Checking account number

Another strategy for building your credit record is to make sure everyone that you pay on time reports this information to the credit bureau.  If you ask someone you make monthly payments to report this to the credit bureau, this may improve your score.

Once you have established that the current information on your report is as accurate as possible, your next goal is to improve your score as much as possible with new credit references.  A methodical approach to credit will yield the best results.  

First, establish a realistic household budget so you have a clear idea of how much debt payment your budget can handle.  A budget allows you to realize how much money is coming in and how much money is going out each month.  A sound budget is key to rebuilding your credit. 

Second, begin to obtain credit.  Evaluate the credit offers you receive based on the type of credit, interest rate, grace period, annual fees and any other terms so you know your exact obligation.  This process is essential because your application process should remain focused.  A large number of credit inquiries caused by a flood of applications by you can cause you to be rejected by creditors who would otherwise approve you.  Be selective! 

A starting point in obtaining credit is getting one credit card.  You may only qualify for a secured card but whether it is secured or unsecured, you can use it to build your credit.  Once obtained, make a small purchase each month (e.g. $25) and pay it off when the bill arrives.  By paying the balance due and not carrying a balance over to incur interest charges shows prospective creditors that you can manage your account.

Once you have established yourself with the one card, you might be anxious to apply for many more cards.  However, you should be careful in not getting too carried away.  Ideally, you should carry one or two bank credit cards, maybe one department store card and one gasoline card.  Try not to charge everything on your bank credit card and not to use your department or gasoline card.  When creditors look in your credit file; however, they want to see that you can handle more than one credit account at a time.  Do not build up interest charges on these cards but use them and pay the bill in full. 

Another method to rebuilding credit is to apply for a small loan at your bank.  After using a credit card for a time, obtaining a small consumer loan and paying that on time will improve your credit score.  Please note, whether it is a new loan, car loan, home loan, student loan or credit card, make sure you are on time with all of your payments.  You must pay all your bills on time after a bankruptcy to build your credit effectively. 

If you follow the steps outlined above, it will take about two to three years to rebuild your credit. In addition, it is extremely important you are on time with all of your payments. If you aggressively build your credit after a discharge, you may be eligible for a home mortgage within a three to four year period.

Other sources for information in credit repair

1. The Guerrilla Guide to Credit Repair: How to Find Out What’s Wrong With Your Credit Rating And How to Fix  It – By Todd Bierman, Nathaniel Wice

2. On Your Own For The First Time – By Jeff Bowers

3. Repair Your Own Credit and Deal With Debt – By Brette McWhorter Sember

4. The Credit Repair Kit – By John Ventura

5. The No -Nonsense Credit Manual: How to Repair Your Credit Profile, Manage Personal Debts and Get   Right Home Loan or Car Lease – By Shaun Aghill

6. The Complete Guide to Credit Repair – By Bill Kelly, Jr.

7. The Insider’s Guide to Manage Your Credit : How to Establish, Maintain, Repair, and Protect Your Credit – By Deborah McNaughton

8. Guaranteed Credit : A Time-Tested Program Guaranteed to Provide Clear, Step-By-Step Information on How to Repair, Restore and Rebuild Your Credit – By Arnold S. Goldstein

9. Getting Out of Debt : Repair Bad Credit and Restore Your Finances! – By Rich Mintzer

10. Repair Your Credit – By George Williams III