A main concern to clients is about reestablishing credit after the bankruptcy is accepted but the court.
Most people think that they can never establish their credit after filing bankruptcy but this is simply not true. People who qualify for Chapter 7 bankruptcy may lose some of their personal property if they exceed their exemptions BUT after your bankruptcy has been processed and your unsecured debt is removed, you can begin rebuilding your credit simply by staying current on rent payments.
If you have credit cards that you did not owe any money on prior to your bankruptcy, avoid putting charges on them. However, don't cancel them. If you close out credit card accounts that you don't use, this could adversely effect your credit score. As your credit score improves over time, you may be able to qualify for a home loan over the course of a few years.
How to Read & Correct Your Credit Report
Your credit report can be your best friend or your worst nightmare depending on the amount of debt you have, how old your debt is, and your ability to interpret your credit report.
The FTC set up a website that allows you can get a free credit report once a year from all 3 reporting agencies. Smart people pull one free report from one reporting agency every 4 months so they can stay on top of any discrepancies because even a small inaccuracy can cause your car insurance premium to increase along with the interest rate you pay for credit cards.
What does CHARGE OFF mean? You still owe the debt. If no payment is received on an account after 180 days creditors are required by law to charge off the account to receive their tax write-off. Then the debt is usually sold to a debt purchaser.
How does the 7 year clock work?
The 7 year clock begins ticking the moment a debt is incurred. Every time a payment is made, the clock resets itself. If no payments are made in 7 years, the debt must be removed from your credit report regardless of whether it was charged off, sold, or in collections. This is the #1 reason why credit reports are inaccurate - debt purchasers & collection agencies keep resetting the 7 year clock (known as aging) in total disregard of the Fair Credit Reporting Act.
Aged accounts must be removed from your credit report. Creditors, collection agencies, and debt purchasers are required to validate debts & PROVE a payment was made which allowed them to reset the 7 year clock & most can't.
Debts you put in bankruptcy. You need to contact all three credit reporting agencies and have them zero out all debts that were discharged in your bankruptcy because you no longer owe the debts.
What is credit repair?
Credit repair & credit watching are both scams! They are designed to gain access to your bank or credit card account because there is no such thing as "instant" credit repair & you can watch your own credit because it isn't rocket science.
Don't fall for the "free" credit reports. The "free" credit reports advertised on TV or internet are NOT free. They all want you to "sign up" for something that costs you money & they offer merged credit reports that are pure garbage & utterly useless.
Close your eBay & PayPal accounts. Neither eBay or PayPal extend credit to their members yet both randomly pull members credit reports without written authorization which may lower your credit score. eBay Inc. also shares your personal info with their entire corporate family (all subsidiaries worldwide), their vendors, etc. thus substantially increasing your level of risk for identity theft by leaps & bounds.
If you have a Yahoo email account close it immediately and change all your passwords for every account you have. In September 2016 Yahoo announced that 500 million accounts were hacked two years prior. Why Yahoo waited for two years is beyond me but certainly falls into the category of way past outrageous.
Tips to establish good credit & raise your credit score.
Correct your credit report within one month of receiving your discharge of debt from the bankruptcy court.
Never co-sign for anything - without exception - especially for family members.
Never share your bank account with anyone - no exceptions.
Get a secured credit card from a local credit union. They will require a deposit of anywhere between $300.00 to $500.00 but it's worth it. Always pay early & always pay more than the minimum payment.
Never pay off your credit cards - always keep a small carry over balance to establish a good payment record.
How to pay off your home in 10 years.
Ask your lender for an amortization schedule. This is a schedule of all of your house payments broken down by payment number, principle & interest. Most mortgages are 30 year mortgages and consist of 360 payments
Every month pay your mortgage as usual. Then write a separate check for your principle payment and write PRINCIPLE ONLY on the bottom left side of the check. Why? Every extra small principle payment you pay wipes out 3 huge interest payments. This will enable you to pay off your home in 10 years.