J Thomas Black
Board Certified, Consumer Bankruptcy Law- Texas Board of Legal Specialization

Some of my bankruptcy clients ask me if they will ever be able to get credit again after bankruptcy. The answer is yes, they will. Then the question becomes, how long will it take for me to re-establish credit? Let me answer it like this. First of all, the fact that you filed bankruptcy can appear in the "public records" section of your credit report for 7 years for Chapter 13, and 10 years for Chapter 7.

The individual debts or "tradelines" reflecting debts that were discharged or forgiven in the bankruptcy, should show a zero balance, and should fall off your report after no more than 7 years. But does it take that long to re-establish credit? Hardly. I have had clients whose credit scores were in the 660 range after one year, and over 700 in the second year after filing bankruptcy. I have had clients re-establish credit well enough to buy a house at market interest rates in as little as 2 years after bankruptcy. How do they do it? You should work at it. Even if you don't ever want to see a credit card again, you should work to re-establish your credit score, because it is used for a lot of other reasons these days, like pricing insurance, and even utilities. You should pull your credit reports at least once per year, and dispute any erroneous items.

You can obtain free credit reports once per year by law, at a web site sporsored by the credit bureaus at www.annualcreditreport.com. Next, religiously pay ALL of your bills ON TIME OR AHEAD OF TIME. To some of my clients, paying "on time" means mailing the bill on the due date. No, no, no. Mail each and every bill at least 5 days before the due date. Also, use only a small portion of your available credit on a particular credit card. If you are re-building after a bankruptcy, it is worthwhile to obtain a low balance credit card with, say a $500 credit limit. Then charge no more than $100 per month, and pay it in full each month.

The credit score "algorithms" or mathematical formulas read this as a sign of responsible borrowing, that you are using only a small part of your avaiable credit; they call it the "credit utilization ratio." And by all means, don't obtain too much credit. After a bankruptcy, believe it or not, your mailbox will be stuffed with credit offers. They figure that (1) you can't file bankruptcy again (at least chapter 7 bankruptcy) for 8 years; and (2) you've eliminated or discharged more or all of your other debts. Viola, you are one of their best prospective customers. But beware, most such offers that you receive immediately after filing bankruptcy, are not good deals. They charge a stiff application fee, an annual fee, bear high interest rates, and/or are otherwise just bad deals. Take your time and evaluate credit offers carefully. A great web site to evaluate credit offers is www.bankrate.com.

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