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If you file for bankruptcy and are wanting to keep some of your credit cards, you will most likely not be able to do so. Your credit cards company will learn of your bankruptcy and will almost unquestionably cancel your credit card. However, there are several ways you can rebuild your credit after filing for bankruptcy.
Obtaining Credit After Bankruptcy
Although you lose your credit cards when you file for bankruptcy, you will still be able to apply for a credit card or other consumer loans. In fact, most people start receiving new offers in the mail in a few short months after their discharge.
While this might not make much sense, here are some reasons why companies may consider you a good risk.
- You will have more discretionary income to pay bills due to your discharge
- People who file for bankruptcy tend to be more financially responsible
- You aren’t able to file for bankruptcy for another 8 years, so there’s plenty of time to collect their debts, if necessary
With that being said, it’s not always a good choice for everyone to get another credit card after their bankruptcy discharge. Weigh the decision with great care to determine if it’s right for you or not.
Rebuilding Credit After Bankruptcy
Credit reporting bureaus favor people who can responsibly handle a couple of unsecured credit cards, a car loan, and a secured credit account. Once you have a good mix of different types of credit, you want to make your payments on time.
Ideally, you’ll want to pay your balances down between 10% and 30% of your available credit. You don’t want to pay off your card entirely, however, because this will cause the credit card company to pull your credit. Each time that happens, your credit will take a hit.
Additionally, the amount of credit available to you will strongly influence your credit score – which is another good reason to utilize under 30% of your total credit available. When you can use your credit card for your everyday purchases and then pay it down – but not off – credit card companies will look at you rather favorably. This is because you are helping them make money without being a huge risk. This can lead to additional credit increases rather quickly since those companies will want you to continue making money for them. If you do these things, your credit score will increase – probably faster than you thought!
If you need help rebuilding credit after bankruptcy, contact a knowledgeable and experienced attorney, like a bankruptcy lawyer in Memphis, TN, who is familiar with the state and local laws.
Thank you to the experts at Darrell Castle & Associates for their input into bankruptcy law.