Repair Credit Score After Chapter 7 Bankruptcy: Learn How
Filing bankruptcy makes it difficult for the individual to get credit, but it is still a possibility. The mention of Chapter 7 bankruptcy puts the borrower into subprime category, which implies that the borrower needs to pay higher interest rates and penalties for defaults. It usually takes approximately 3 to 6 months for a typical Chapter 7 bankruptcy to close, after which the person filing bankruptcy is pronounced debt-free – except for car loans, home mortgages and debts such as student loan or an unpaid child support. “How to repair credit score”, however, is always a big question for defaulters. To help, this post discusses a number of ways for individuals to repair credit score after they have filed Chapter 7 bankruptcy.
Improving Credit Score Post Bankruptcy
After filing bankruptcy, individuals are often in a better position to save, because of the eliminated debt, which means they can easily plan a stable financial future. To begin with, it is advisable for individuals to not borrow money too quickly after filing bankruptcy, and make timely payments to repair credit score and get loans at lower interest rate. So, here are the three ways that might help an individual improve the credit score:
Local banks and credit unions issue share-secured or savings loans to individuals. One might plan to use the entire paycheck or a portion of it to issue a savings-secured loan. A community financial institution rarely checks the credit score, since the applicant is borrowing against own cash. The individual needs to deposit a specific amount of money, which usually is at least $250 to open a savings account. The bank lends the exact deposited amount and freezes the savings account as collateral. Every month when the borrower makes loan payment and the amount is freed up in the savings account. Ensure to pay the balance on time and try to have multiple savings-secured loan accounts with a deposit term of at least 12 months.
Secured Credit Card
Credit unions and local banks also offer secured credit cards to individuals, but it works slightly different from the savings-secured loan. The staff might check the credit score and hold the savings account as collateral if an individual defaults on the credit card account. The individual needs to keep the balance to less than $300, if the credit limit of the card is $1,000 and make more than a minimum payment to maximize the credit rebuilding efforts. Following these tips may turn a secured card to an unsecured one after some time.
Another smart way to improve the credit score is by becoming an authorized user of a credit card with positive payment history and low balance. Request a family member to add the name as an authorized user and even if they cut up the credit card immediately after receiving it, the positive credit history would improve the credit score.
Last Few Words
Bankruptcy reduces the credit score of an individual by as much as 240 points, which increases the need to keep a close eye on the credit report post-event. The leading credit reporting institutions – TransUnion, Equifax and Experian provide free credit report once every year and it is imperative for individuals, specifically those who have declared bankruptcy to check the report to trace out any wrong transaction and data that may lower the score. Chapter 7 bankruptcy could help an individual end the financial nightmare, but one needs to start rebuilding the credit score right away to have better plans for the future. To know more about credit repair and for free consultation, you might get in touch with the experts at RMCN Credit Repair Services, Inc.