Credit Repair

Credit Repair

Your credit rating is the key to your future purchasing power after a bankruptcy. The way you rebuild your credit greatly will influence whether your rating remains low, increases slowly over time, or increases rapidly.

You can access your credit report for free online at www.annualcreditreport.com.

The best starting point for the repair process is your credit report itself. The three credit reporting agencies are:

• Experian (1-888-EXPERIAN or www.experian.com)

• Equifax (1-800-685-1111 or www.equifax.com)

• TransUnion (1-800-916-8800 or www.tuc.com)

Your credit report provides information about your finances to prospective creditors when you apply for credit. Credit reports also are used by potential employers and some auto insurance companies. You want to make sure that your credit report is as accurate as possible.

As of March 1, 2005, federal law entitles you to one free copy of your credit report annually. A review of your credit report will help you determine its accuracy. If you find any errors, you should write to the credit bureau you received the report from and tell them what information you dispute. Follow up in a couple of months to make sure the information has been corrected. If you dispute something in writing, the credit bureau has to check the information, and they will remove it if their investigation proves you were correct.

The credit bureau may not accurately reflect your bankruptcy discharge; therefore, you should send them a copy of your discharge notice and the schedule of creditors. Furthermore, you may want to inform the credit bureaus of the following information (credit bureaus do not have to add this information but often will):

• Current employment

• Current residence

• Current phone number

• Date of birth

• Checking account number

Another strategy for building your credit record is to make sure you make your payments on time and that credit bureau reports that you are making your payments on time. It may be helpful to ask your creditors to report your good payment history to the credit bureau.

Once you have established that the information on your report is accurate, your next goal is to improve your score as much as possible with new credit references. A methodical approach to credit will yield the best results.

First, establish a realistic budget so you have a clear idea of how much debt payment your budget can handle. A budget allows you to realize how much money is coming in and is going out each month. A sound budget is key to keeping your finances in order and to rebuilding your credit.

Second, begin to obtain credit. Evaluate the credit offers you receive based on the type of credit, interest rate, grace period, annual fees and any other terms so you know your exact obligation. This process is essential because it is important to limit how many credit applications you make. A large number of credit inquiries can raise a red flag with a potential creditors. Be selective!

A starting point in obtaining credit is getting a single credit card. You may only qualify for a secured card but whether it is secured or unsecured, you can use it to build your credit. Once obtained, make a small purchase each month and pay it off when the bill arrives. Paying the balance due each month shows prospective creditors that you can manage your account.

Once you have established yourself with the one card, you might be anxious to apply for many more cards. However, you should be careful in not getting too carried away. You should carry one or two bank credit cards, maybe one department store card and one gasoline card. Try not to charge everything on your bank credit card and not to use your department or gasoline card. When creditors look in your credit file; however, they want to see that you can handle more than one credit account at a time.

Another method to rebuilding credit is to apply for a small loan at your bank. After using a credit card for a time, obtaining a small consumer loan and paying that on time will improve your credit score. Make sure you are on time with all of your payments whether they are new loans, car loans, home loans, student loans or credit cards. You must pay all your bills on time after a bankruptcy to build your credit effectively.

If you follow the steps outlined above, it will take about two to three years to rebuild your credit. If you aggressively build your credit after a bankruptcy discharge, you may be eligible for a home mortgage within a three to four year period.

Other sources for information in credit repair

1. The Guerrilla Guide to Credit Repair: How to Find Out What’s Wrong With Your Credit Rating And How to Fix It – By Todd Bierman, Nathaniel Wice

2. On Your Own For The First Time – By Jeff Bowers

3. Repair Your Own Credit and Deal With Debt – By Brette McWhorter Sember

4. The Credit Repair Kit – By John Ventura

5. The No Nonsense Credit Manual: How to Repair Your Credit Profile, Manage Personal Debts and Get Right Home Loan or Car Lease – By Shaun Aghill

6. The Complete Guide to Credit Repair – By Bill Kelly, Jr.

7. The Insider’s Guide to Manage Your Credit : How to Establish, Maintain, Repair, and Protect Your Credit – By Deborah McNaughton

8. Guaranteed Credit : A Time-Tested Program Guaranteed to Provide Clear, Step-By-Step Information on How to Repair, Restore and Rebuild Your Credit – By Arnold S. Goldstein

9. Getting Out of Debt : Repair Bad Credit and Restore Your Finances! – By Rich Mintzer

10. Repair Your Credit – By George Williams III