Tips for Rebuilding Credit after Bankruptcy

New Jersey bankruptcy lawyer

While it is an unpopular choice, filing for bankruptcy is very common in the U.S. According to government statistics, in 2013, 1,107,699 people and businesses in the U.S. were forced to file for bankruptcy. Although it is an unpleasant experience, filing for bankruptcy does not mean that you will never again attain financial stability.

Bankruptcy protection is intended to offer individuals and businesses a method of discharging some of their debts and an opportunity for a fresh start. One of the initial steps in strengthening your financial life is to rebuild your credit score.

The effect of bankruptcy on your credit score

Bankruptcy will have an adverse effect on your credit score. Lenders look at credit scores when making decisions about whether to offer you a mortgage or car loan, and in the event they do, what interest rate to charge you. Credit scores enable lenders to determine the level of risk involved in lending you money.

The extent to which a bankruptcy harms your credit score is dependent on the point at which you began. The Fair Isaac Corp., which is also known as FICO, is the company that is most widely recognized for calculation of credit scores. According to FICO, an individual with an outstanding score of 780 would experience a severe decrease in their score to somewhere between 540 and 560, following a declaration of bankruptcy. Someone with a beginning score of about 680 can anticipate a decrease to a figure between 500 and 530 after bankruptcy.

How to rebuild your credit

There are measures you can implement to start to rebuild your credit, and thus, the health of your finances. The first objective is to rebuild your credit score. Obtain a copy of your credit report, free of charge, from all three credit reporting agencies. You can secure a copy once annually. Examine the report to determine whether it contains any errors. In addition, find out your FICO score, and work carefully to increase this score every month.

Among the steps you can take are to pay your bills in a timely fashion. Do not spend an amount in excess of what you can afford. Get a credit card that notifies the reporting agencies, and pay the balance in its entirety every month. In so doing, you will not incur any interest charges, and this will gradually help improve your credit score.

While it may seem counterintuitive, it is imperative that you refrain from avoidance of credit following a bankruptcy. Rather, conscientiously repay any loans, including car and student loans that remain despite bankruptcy. You may also consider getting a secured credit card. Use it toward one purchase monthly, such as a utility bill, and then pay it immediately. It will serve as a helpful credit reference.

Furthermore, open a new bank account and you will show financial stability. Discuss with your banker the option of paying your bills via the automatic online bill pay system. This will make certain that your bills are paid timely, which is important for good credit.


Are you thinking about filing for bankruptcy? Contact Mr. Spivack today to learn more about your bankruptcy options and to schedule your free consultation.

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Attorney Joel R. Spivack is an experienced bankruptcy and residential real estate transactions lawyer in Cherry Hill, New Jersey. Clients come to us for legal services, but what we really provide is peace of mind. For more than 30 years, Attorney Spivack has helped people make wise, informed decisions about bankruptcy filings, debt relief options and residential real estate transactions.
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