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Irvine Bankruptcy Lawyer / Rebuilding Credit

Fear of damage to their credit is one of the major concerns that keeps some people from filing for bankruptcy despite the fact that they are struggling with debt. Putting off bankruptcy might not be the best approach, however. If you are missing payments or making late payments on your bills, or if you have a large amount of debt that is not getting paid off, your credit score is likely already low and only going to get worse. It is important to be aware of and concerned about your credit score, but doing nothing to solve your debt problems will only hurt your credit. Filing for bankruptcy, on the other hand, can be an important step to climbing out of debt and rebuilding and repairing your credit.

The truth is that you can start rebuilding your credit as soon as you file for bankruptcy; you do not need to wait for the bankruptcy to exit your credit report before your credit can improve. Below we offer some tips and facts to shine a light on how to start rebuilding your credit during and after bankruptcy. For more detailed information and assistance related to your particular situation, call The Law Office of Charles A. May for a free consultation with a knowledgeable lawyer. We help people in Orange County, Los Angeles and throughout Southern California solve their financial troubles and move forward with a better life.

Pay Your Bills

There is no way to escape having bills to pay every month. Everyone has rent or mortgage payments to make and utility bills to pay, and many of us have car payments, student loans, insurance, and other bills that come due every month. Late payments and unpaid bills hurt your credit. In contrast, making timely payments improves your credit. Not only will you have a lower debt load by paying your bills, but you will be establishing a clean payment history on your credit report. Even if you do miss a payment now and then, maintaining a history of on-time payments can help balance out any negative marks on your credit report.

Get a New Credit Card, but Choose Wisely

After filing for bankruptcy, it may seem counterintuitive to pick up a new credit card as a means to rebuild your credit. After all, credit card debt is likely a major contributor to your need to file for bankruptcy in the first place. Most consumers who file for bankruptcy do so with tens of thousands of dollars of credit card debt on the books. Yet, used responsibly, credit cards can be an effective tool for building credit.

Many people are surprised to find their mailboxes flooded with credit cards within days or weeks of filing for bankruptcy. Why is this so? Wouldn’t a credit card company consider you to be a poor credit risk and thus be unwilling to offer you new credit? Actually, credit card companies understand that you are about to get your debt eliminated in bankruptcy and come out with a stronger debt-to-income ratio than before, meaning you will have a renewed ability to charge expenses and service your debt.

Charging purchases to a credit card and paying it off regularly, or even maintaining a small revolving balance, looks good in the eyes of the credit reporting bureaus and is a factor they use to raise your credit score. However, doing so takes discipline. If credit cards got you into trouble before, you will want to be extremely careful about getting new ones. Do not get too many, and don’t overcharge; remember that credit card interest rates can be as high as 24%, making them a poor option compared to other forms of borrowing. They can, however, be useful for making some purchases so long as you are responsible, and using them this way can help your credit. Part of your bankruptcy proceeding will involve credit counseling, which can help you learn to use credit cards more responsibly, if this was a problem for you before.

If you can not get a major credit card on good terms (low or no annual fee, reasonable interest rate), then you might consider applying for a secured credit card. A secured credit card gives you a certain amount of credit based on a cash deposit you make. This can be a smart move because it limits your exposure and prevents you from charging more than you can afford to repay. Using this card wisely will improve your credit over time and make you eligible for a major credit card or other credit on favorable terms.

Keep an Eye on Your Credit Report

When banks or other lenders check your credit, they are looking at your credit report provided by one of three credit reporting bureaus – Equifax, Experian, and TransUnion. Your credit report is usually accurate, but there could be mistakes. For instance, bills you paid might show up as late or missing, and debts that you got discharged in your bankruptcy might still show up as past due. If you find errors like these, there is a process for notifying the credit reporting agency and getting them fixed. By monitoring your credit report regularly, you will be able to spot and fix any errors, and you will have the same information that lenders do, so you will know where you stand when applying for a loan.

Lots of companies offer credit monitoring services for a monthly fee, but you can do it yourself for free. Federal law requires each of the three main credit bureaus to give you one free credit report every year. If you request your annual credit report from a different company every four months, you can stay on top of your credit report without any additional cost. You can get your credit report for free at www.annualcreditreport.com.

Contact The Law Office of Charles A. May for Help With Bankruptcy

At The Law Office of Charles A. May, we do more than simply handle the legal aspects of your bankruptcy filing. We want you to be successful, and we will be looking out for you during the whole process, making sure you understand what to expect, what steps to take, and when. If you are struggling with debt in Orange County, Los Angeles, or anywhere in Southern California, give us a call for a free consultation with our compassionate and dedicated bankruptcy lawyer.

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