After bankruptcy what are the steps and timeframes to building good credit?

Answer 1

After your discharge, you will be untouchable (for the most part) for 12 months. It would be helpful to your future credit situation if you redeem at least one, and preferably two, revolving accounts. You will need a minimum of 2 revolving accounts to rebuild your credit. The length of time these have been open is an important factor. If you cannot redeem accounts, you will need to open up two revolving accounts. This will be difficult during and immediately after a bankruptcy, but is essential. You will have to try for secured credit cards.

Whichever way is available to you; you need to use these accounts every month. I suggest that you make a nominal purchase, like ONE tank of gas (something you need to buy anyway) and pay it off in full every month. A new account will not help you for at least 6 months. An older, pre-existing account will help your scores, even if the account had some late payments during the time around your bankruptcy. It is very important to have positive credit offsetting the derogatory information about your bankruptcy.

Limit derogatory information to your bankruptcy time period. It is very important to make a clean break from your financial issues and start over. If you have trouble managing finances, get some assistance and training in making a budget and living within your means. Bankruptcy doesn't have to be fatal, but lenders and investigators will be looking to see if you learned your lesson and changed your ways, or just used the system to escape your obligations. For a trained professional, this kind of information is easy to see in a credit report.

Make sure that you pay all your bills on time from discharge onward. Get copies of your credit report from the bureaus and follow up with them to ensure that every account discharged in BK is recorded properly. It should have no derogatory data showing except for the "discharged (or included) in bankruptcy" notation. That way you are only getting a deduction for the legal entry and not for each individual trade line on top of it. Good luck!

I think the Credit Lady has given some sage advice above, but I tentatively disagree on one point: she indicated that you should pay off the credit card charges in full every month, whereas the credit counselors to whom I have spoken indicate that if you pay the charges off in full every month, the positive payments never show up on your credit report. The counselors I have spoken to indicate that for a payment to "count" as a positive event on your credit, the payment must be paid toward revolving credit, and credit paid in full every month never "revolves." They suggested putting something on your credit card you buy each month anyway (like a tank of gas as the Credit Lady suggested), then make timely, minimum monthly payments (as prescribed on the monthly credit card statement) on it for a few months, then pay it off and start over. These timely monthly payments go on your credit as timely payments, and since the balance is not paid off, they count toward your credit score. Of course you will eat some interest in letting the balance roll over from month to month, but if you keep the balance low (i.e. a tank of gas, NOT a new living room suit) then the interest should be manageable.Please note that nothing in this posting or in any other posting constitutes legal advice; this is simply my understanding of the facts, which I do not warrant, and I am not suggesting any course of action or inaction to any person.