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Starting Over after your Bankruptcy: What you can do to Help Begin Repairing your Credit

Credit Repair

First things first: we all know that bankruptcy can severely damage your credit score. Luckily, however, it doesn’t have to be a life-long sentence!

You can begin rebuilding your credit rating almost immediately after you file for bankruptcy, provided you have recognized your credit mistakes in the past and have learned from them. A good place to start is consumer credit counseling classes. These classes can help you properly manage your monthly finances and budget, and can also teach you ways in which you can responsibly handle your debts and rebuild your credit rating.

Secured Credit Cards

A great first step is to apply for a secured credit card. A secured credit card essentially means that you send the credit card company a certain amount of money that they hold in a separate account. The amount you send generally matches your credit limit. For example, if you have a credit card with a $500 credit limit you would have to send the credit card company $500 to secure the card.

If you pay the bill on time, your $500 remains in your account. If, however, you fail to pay the credit card bill, the credit card company simply takes the money out of your account to settle the debt. The credit card company will then likely cancel your account, so it is well worth your time to remain responsible when dealing with a secured credit card.

It is also important to remember that a secured credit card can affect your credit rating, so always pay your balance in full every month so that you can begin rebuilding your credit rating.

Unsecured Credit Cards

Another option may be a credit card with a low credit limit. Many people can successfully get credit cards while still in bankruptcy, but it is important to remember that these cards often come with high fees and equally high interest rates. In other words, pay off your balance in full each month to avoid paying astronomical interest rates and to begin building a positive credit history.

A bankruptcy is certainly going to blemish your credit score, but you can begin working toward a brighter credit future if you act now!

Beware of Credit Card Scams

Credit Repair

You lost your job, you fell behind on your credit card payments and your credit has plummeted now to the point where you can’t get approved for a car loan. Then, almost out of nowhere, you get a letter, or a phone call or an email from a company claiming to fix your credit score – overnight!

Unfortunately, this scenario has been played out all too often all over the United States, particularly over the last couple years.

If this type of offer sounds tempting, imagine what an individual with poor credit must think. Unfortunately, there are many scammers hoping that this kind of promise sounds just too good to pass up.

Too Good to be True?

The credit crisis of the last, two years has left the door wide open for scammers looking to take advantage of consumers who find themselves in financial trouble. In other words, these types of “fix your credit overnight” companies are downright bogus, and even illegal!

They work by making promises of a quick credit fix, and often charge hundreds, if not thousands, of dollars to do it. And the only thing the consumer is left with is an empty bank account and still-poor credit.

There is no Substitute for Hard Work

Although it may sound enticing to hire the services of a company that promises to instantly repair your credit, the reality is that it just can’t happen. There is absolutely nothing a company can do (legally) that can change a poor credit score into a picture-perfect one.

Although this may be hard to hear, there is so substitute for working hard to repair your credit. It will take some time to accomplish, but it is possible to repair your credit by paying your bills and taking care of delinquent or past due accounts.

Consider Credit Counseling Service

For those consumers in credit trouble, there are many not-for-profit credit counseling companies that can help you repair your credit by working with your creditors to set up reasonable payment plans and by reducing or eliminating charges and fees.

There is a big difference between a credit repair scam and a credit counseling service, however. It is therefore important to research the credit counseling company beforehand and to carefully read all of the terms of the agreement.

Beware of a company that contacts you and promises to repair your credit for a fee! A credit counseling service will never ask for upfront fees to work with you. They will also be accredited and will likely be licensed in the state in which they are operating.

Scammers, on the other hand, will often not have a permanent address, and many of them will operate out of the country to avoid prosecution.

If your credit is poor and you are struggling to pay your bills and maintain your credit rating, then it may be time to contact the services of a credit counseling agency. Always remain aware and vigilant, however, of any company offering the “too good to be true,” as this is often the case!

Don’t let desperation and despair get the best of you – credit scammers are counting on it! Instead, remain level headed and educated and work towards the ultimate goal of repairing your credit.

The Importance of Using Credit Responsibly from the Beginning

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Instead of the “what if’s” in life, wouldn’t it be great to do things right in the first place?

For young adults, the importance of using credit wisely is vital. Good credit can open up doors for many young adults and allow them to enjoy the benefits of high credit limits and low interest rates. It can allow them to purchase their first car, their first home and even start their first business.

On the other hand, poor credit from credit mistakes made during young adulthood can really limit our choices as we look to purchase those items that carry us through to adulthood, like a home and car.

Making the Right Choices from the Beginning

Many of us obtained our first credit card during our college years when it seemed like credit card companies set up shop around every corner. Many of us were lured into the idea of a credit card, and credit card companies were banking on that.

However, many of us blindly and irresponsibly used credit during this time and therefore paid the price.

For young adults, now is the time to set the standard for our credit, and to make responsible choices that will afford us a strong credit score and a future full of opportunities.

Understand Creditors and What they are Betting on

To truly maintain a great credit rating, you must first understand the purpose of credit cards and why creditors issue them.

Creditors are betting on the fact that the majority of credit card holders will not pay off their card in full every month, as they make their money on the interest that they charge.

Before you make a purchase, consider whether you have the money to pay the bill at the end of the month, or if you are willing to pay the creditor in the form of interest charges.

Always Spend within your Means

For many credit card holders, a credit card is an excuse to spend money that they simply do not have. Do not fall into this trap! Instead, stop and consider your monthly budget before making purchases that are simply not within your budget or that you don’t really need.

Always remember that, in the realm of credit, we don’t have a second chance to make a first impression!

Useful Information about the Fair Credit Reporting Act

Credit Repair Introduction

What you don’t know about the Fair Credit Reporting Act could cost you.

The Fair Credit Reporting Act (FCRA), which is enforced by the Federal Trade Commission, is a federal act designed to ensure that consumers’ privacy is protected and that the credit reporting agencies maintain accuracy and abide by certain responsibilities.

Perhaps one of the most important features about the FCRA is that consumers are entitled to a copy of their credit report from all three, national credit reporting agencies – Equifax, TransUnion and Experian – once a year.

There are also other instances in which you may be entitled to a free credit report:

• - If you have been denied for credit, insurance or employment (you must ask for a copy of your credit report within 60 days of being denied)
• - If you are unemployed and plan to begin looking for a job within the next 60 days
• - If you are on welfare
• - If you have been a victim of fraud or identity theft

Under the FCRA, you also have rights regarding inaccuracies which appear on your credit report. The credit reporting agency in which the inaccuracy appears, as well as the creditor who provided the information, have an obligation and a responsibility to investigate and correct the inaccuracy within 30 days.

Simply inform the credit reporting agency in writing. The credit reporting agency must then forward the information to the creditor, who must then investigate and review the information and report back to the credit reporting agency.

Upon resolution of the inaccuracy, the credit reporting agency must provide you with the written results of the investigation, as well as a new copy of your credit report (if the dispute results in a change on your credit report).

Finally, the FCRA recognizes that the only individuals who can obtain a copy of your credit report are those individuals with legitimate business needs. In addition, your employer may only access your credit report upon your approval.

If you have experienced violations of the FCRA, you should report it directly to the Federal Trade Commission at:

Consumer Response Center — FCRA
Federal Trade Commission
Washington, D.C. 20580.

Tackling your Credit Card Debt One Card at a Time

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If you are feeling utterly overwhelmed by your credit card debt and unable to get out from under the balances that seem to go nowhere then you’re not alone. Currently, one in 20 American households owes more than $8,000 on their credit cards.

Luckily, most of us have options regarding our credit card debt. Consolidation loans or home equity loans are often taken out to address the problem of numerous credit cards with high interest rates. But if your credit isn’t strong enough or you are unable to secure a home equity loan, then you may have to tackle your credit card debt one card at a time.

Here are several steps to assist you in reducing your credit card debt.

1. Organize all of your credit cards and separate them according to their interest rates.
2. Start with the credit card with the highest interest rate and work on paying that one off first.
3. Pay the minimum payments on your other credit cards and put any extra money onto the highest interest rate card.
4. Look for ways to cut back or save on your monthly budget, and put the additional money towards your highest interest rate card.
5. Once the card is paid off, move onto the card with the next highest interest rate and continue the plan of paying only the minimum payment on the other cards.
6. As each card is paid off, take the money you would have been paying towards that card onto the next highest interest rate card.
7. As you continue to pay off cards, you will free up more money every month to put towards another credit card, thereby paying off subsequent cards sooner.
8. Once you pay off a card, cut it up – but don’t cancel it! Canceling credit cards may have a negative affect on your credit score.
9. Once you have paid off all your credit card debt, put the extra money you would have been using to pay off your credit cards into an interest-bearing account that will serve as an emergency fund. Aim to put at least six months worth of your salary into your emergency fund.

How to Begin the Process of Rebuilding your Credit Rating

Credit Repair

If you have a damaged credit score from past problems or indiscretions, don’t despair. There are ways in which you can work to rebuild your credit rating so that you can look forward to a more positive financial future. Below are initial tips that will get your credit on the road to a positive credit score.

1. Order a copy of your credit report. Hiding from your credit problems will not make them go away. Therefore, ordering a copy of your credit report from all three credit reporting agencies is an excellent, first step in taking accountability for your past credit mistakes. It is also the best way to simply see where you are and to leave no credit blunders left unturned, so to speak.
2. Call your creditors. There is no better way to address your credit problems than to simply contact your creditors. Most creditors will be more than happy to work with you to find easier repayment terms so that you can begin righting your credit wrongs.
3. Pay off your existing debt to lower your debt-to-income ratio. Repairing your credit is an important step, but lowering your debt-to-income ratio is also important. It is therefore extremely important to develop a game plan to pay off your existing debt, and to stick to it!
4. Do not apply for any new credit. Instead of incurring more debt, avoid taking out any new credit cards, personal loans or auto loans during this time. Instead, focus all your attention on your existing debt and how you can pay it off.
5. Don’t ignore other types of monthly bills. It’s often the bills we don’t think about that have the biggest impact on our credit scores. Water bills, electric bills, phone bills and gas bills are just some of the monthly bills we all pay. But many of use fail to recognize that not paying these bills in full or on time can have an adverse effect on our credit. Bottom line: don’t forget about even the smallest of debts when it comes to rebuilding your credit score!
6. Find ways to increase your payments. One of the best ways to improve your credit is to reduce your debt. And a great way to make a greater impact on your debt is with larger, monthly payments. Don’t think you have extra money each month? Make a budget and stick to it! You may be surprised to find that your monthly “incidentals” are preventing you from paying off your debt!