Rebuilding Credit After Bankruptcy

: Chris Lee Law Firm

  Filed under: Money Management

For many individuals, building credit after a Dallas bankruptcy is a daunting task. Almost all aspects of our lives ranging from jobs to insurance to even mortgage payments are based on our credit score. Those serious about rebuilding credit will make money management one of their top priorities. Over time, proper money management will re-establish a credit score of at least 750 once bankruptcy marks fizzle from the credit score.

A Credit Rebuilding Strategy

Regardless of whether you filed for Chapter 7 or Chapter 13, it will take time to rebuild your credit and financial strength after a Dallas bankruptcy. Responsible money management will help improve your FICO score, which is based on available credit as well as debt-to-income ratio.

First, focus on your overhead costs. Figure out how much money you need to provide for shelter, food, and other basics.  A solid financial strategy would be to keep costs for essential living below 50% of taxed income. Once the basics are covered, begin building en emergency fund as well as ensuring that all bills are paid on time. This money management approach will help you rebuild credit.

While it may seem counterintuitive, securing a credit card account immediately after being discharged from bankruptcy can be a good thing. Establish a card with a low ceiling and ensure that you don’t exceed 30% of its total limit. Once you have outstanding credit, make certain to make all payments on time. Establishing a regular pattern of reliable payment history will continue to build credit over time. Remember, payment history composes 35% of your overall credit score. Pick a credit card that is secured.

Close accounts cautiously. Do not simply close lines of credit. Since part of the FICO score is based on debt-to-available credit ratio, closing an account can suddenly reduce available credit, thereby tilting the ratio negatively. When planning money management, the key points will be to avoid actions that will lead you to a similar situation.

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