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Can I repair my credit after Chapter 7?

After filing for Chapter 7 bankruptcy, you may have questions about your future creditworthiness. Certainly, your counselors advised you that bankruptcy would leave a temporary negative mark on your credit history, but you may be unsure how or when you can begin to rebuild your credit.

In fact, as each year passes, the bankruptcy becomes less of an issue to would-be creditors. While the bankruptcy remains on your report for 10 years, you do not have to wait that long to begin making repairs.

Get out from under debt and start rebuilding

Your first step to rebuilding your credit after a bankruptcy is to realize the position you are in. Every financial move you make affects your creditworthiness, so you want to avoid taking on more than you can handle or spending beyond your limits. You also want to stay on top of your credit history by frequently checking its progress and reviewing it for mistakes you can correct or negative entries you may be able to get your creditor to remove. Additionally, these actions may help keep you on track:

  • Make a budget using the skills you learned in your credit counseling.
  • Build an emergency fund to protect you from making desperate choices when unexpected expenses arise.
  • Begin increasing your score by obtaining credit through any of these means:
    • A secured loan allows you to borrow against the money already in your account.
    • A secured credit card also limits your spending to the amount you deposit.
    • Getting someone to agree to co-sign for a loan will boost your score, but it also places your co-signer at risk if you fail to pay.
    • If friends or family are reluctant to co-sign, they may authorize you to use their credit card.
  • Be scrupulous about making your payments in full and on time.
  • Keep the balances low on your credit cards, always less than 30 percent but ideally lower than 10 percent.

If your credit history is the one factor that is preventing you from filing for bankruptcy, consider the fact that your continued delinquency on your debts is likely already wreaking havoc on your score. Within a year, many who successfully complete bankruptcy are able to raise their scores to a level higher than before they filed. Additionally, they get the relief of not having to carry around the burden of unmanageable debt.

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