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The 6 steps to rebuilding your credit after filing a chapter 7

March 11, 2017

So you’re ready for a fresh start. You’re ready to get rid of your debt and start rebuilding your credit.

You’re thinking about filing bankruptcy but you’re wondering:

Can filing bankruptcy really improve my credit score?

Absolutely. Filing bankruptcy can improve your credit score. But not by itself.

Here’s what I mean.

Bankruptcy simply eliminates most of your debt (you’ll still owe child-support, student loans, and most taxes). You still have to take steps to rebuild your credit. If not, your credit score will stay in the dumps.

The truth is you can raise your credit score into the low 700s less than 2 years after you file bankruptcy. To do that, you have to put in the work.

The 6 steps to rebuilding your credit after filing a chapter 7

First, if you haven’t already done so, open a checking and a savings account. Sure, that reloadable card works. But it’s doing nothing for your credit score. Before they’ll lend to you, lenders like to see that you have both a checking and savings account. Those two things make you seem stable.

Second, build an emergency fund. This can be hard to do. Especially if you don’t have much left over out your check after you pay rent and living expenses. But trust, even if you only save $1 a paycheck, start there. Let that dollar build your saving habit. Who knows? Several months later you may be saving $10 a check. Maybe even a $100.

Third, get a credit builder loan. St Louis Community Credit Union has a credit builder loan that allows you to borrow $600 and pay it back over 12 months. The great thing about this loan is that it reports monthly to the credit reporting bureaus.

Fourth, get a secured credit card. Sure, you can get a secured card from Capital One. But why not stay local, and get a secured credit card from a credit union here in St Louis. Electro Savings Credit Union offers a secured card with a credit limit of up to $1500. They also offer a credit builder credit card that comes with a limit of up to $1000.

Fifth, pay your bills on time. Especially your credit builder loan and secured credit cards. Paying your bills on time has the biggest impact on your credit score. So do your best to never pay late.

Finally, about a month after your bankruptcy case is over, complete the Annual Credit Report Request Form. Doing that will allow you to pull your credit reports. Review your reports to make sure that all the debts you had before you filed bankruptcy say: $0 balance — discharged in bankruptcy.

If your report says something else, submit a dispute to the credit bureau in writing. Do not send your dispute electronically. Instead, mail your dispute certified mail, return receipt requested.

certified-mail-card-green

Keep a copy of the signed dispute form you sent and of the green card you got from the post office

Download: Equifax dispute form
Download: Experian dispute form
Download: TransUnion dispute form

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