When/How to start rebuilding credit?

[dawntyoung]

HRx: Thank you for that info!!! I have been pondering if I should dive right into applying for lines of credit right after discharge. I just enrolled in law school, am unemployed and concerned that taking on lines of credit would be too much right now. Plus most of my debts will be removed from my credit report around the time I will graduate. While I know they may not be enough, I have student loans to rebuild my credit. Those I have made a priority (for obvious reasons, lol) and commitment to paying monthly on time. The rest of my bills are living expenses which do not report on my credit report.

It feels good to know that time off is an acceptable plan as well. While others here may not HEAR this, I am highly thankful for your advice.

8-19-10: Filed ch7, pro se, no assets
9-16-10: 341 Meeting of Creditors
Now in the 60 day club!!! Yay!

[marcia54]

Right after I filed BK one of my creditors called and I informed them that I had filed BK, but wanted to reaffirm because the only thing on the account was a TV. They took the info and after the 341 hearing my attorney told me he had received reaffirmation papers from the CC company. He also told me that I didn't have to reaffirm, but it would help rebuild my credit. Papers were signed and I am now paying very little(according to the agreement) and I feel very good about it.

Having to pay cash or use my debit card doesn't bother me since even my Secretary of State office now accepts the ATM cards. AND it's easier to budget now without having to remember who to pay when.

[jomak]

Really nice topic and great information, thanks for sharing, interesting information and advice. useful for all people. it was great helpful to me.

[SonnyBoy]

Rebuilding credit is no easy task for a few key reasons.

Number 1, we're all dumb if we're in this mess. Sure we can blame hard times, or overarching necessity, but the bottom line is, think back to the beginning of your credit life. At the end of High School or College, right? And what do they teach you in college about how to handle personal finances, establish and build credit over time, and prepare yourself for financial hurdles in your future? ABSOLUTELY NOTHING! And the fine print on those credit cards and offers, well, that's so small, we don't take time to read all that, and those card companies know it.

Number 2, we're creatures of habit. We can blame circumstances, cards, or even Christmas, but the bottom line is, we're at fault because we have bad spending and credit habits.

In most cases, number 2 is caused by number 1. Unfortunately, both end up putting you in a pile of "number 2" fast in life. I've been through defaulted school loans, lease break penalties, credit card delinquencies, car loan delinquencies, unemployment and unforseen medical complications and disability, you name it! You can read about all of that all day on my personal blog I started at armchaircreditrepair. blogspot . com. I started it because I had people asking me about what I went through and what I've learned, so feel free to read it and either be bored to death or find an occasional nugget of wisdom.

One of those nuggets of learning I've had is dealing with banks, secured cards, and unsecured accounts online and elsewhere. Short story is this: The big box banks are clowns. They try to bait you in with all the promises of their credit cards and future things you can do, then do nothing to help you with your credit down the line. For example, I had a BOA account started in '04 and, although having rough financial problems at the time, started a secured card by paying like $300 for a $500 card. They refunded that to me after some time passed and I did well on my payments, but I still have to pay $30/yr for an annual fee and the % rate isn't great. The kicker is, they don't raise my credit line at all, even though I've rebuilt my score to a much better level. My point, watch out for the small ones with no room to move. Tips: Check out credit unions that may be more flexible or generous. Check out some online tradelines with an online store out there (watch for scams). I've found a few legit ones, and they've helped me quickly raise up my availability. One of them is a place called enchanted attire. Not cheap, but compared to the money I've put into that little BOA card, it's worth it, especially for the $5k line I have open with them. I enjoy some good positive credit account reporting from them for it by just putting a purchase on there about once per quarter and paying off full. I hate my BOA card and plan to ditch it soon, but only after my new credit union line for $7500 gets a few more months of history (as I said, credit union much more generous, surprisingly so for me...my mouth dropped when they said I was qualified for this, called me a "B" credit guy. In fact, I think the online account with EA probably helped raise up my score enough to get me there. I don't have much knowledge of the Orchard Bank offer but sounds ok, depends on the limit. Whatever you do, also make sure you manage your new lines and keep them positive. Like I said, we're creatures of habit, and if you are not careful, your old bad habits will re-manifest themselves!

[JoePlumber]

Hi,

I always tell people that filed BK to wait a minimum of one year to applying for new lines of secured/unsecured credit. Society has made low and middle income people so dependent on credit that.........re-establishing credit is the first thing a family/person wants to do after they had all thier debts (credit card) discharged under BK! If a person wishes to live a propersous finanicial life after BK, they need to take the time to change how they view debt, money, and credit; this is critical!!!! Hence, living life on a cash only basis for a year more can truly play an integral role in augmenting ones' concept of debt, money, and credit.

During this one year + timeframe, you should be saving/investing as much money as possible! Again, the majority of individuals that files for BK don't have any liquid monies at there disposal. I gaurantee that, the feeling of having $3,000, $5,000 or $10,000 of liquid monies in the bank will be a more satisifying feeling, than it is to be "re-establishing" your credit!

But to answer your question, you can apply for new credit the moment your BK is discharged. But keep in mind that, time will work in your favor too. You'll be recieving secured credit card offers left and right without even having to apply for it. Within a year or two of your BK getting discharge.

Just some food for thought!

Good Luck!

I have to agree with HRx about waiting and learning to live in a cash world and all that comes with delayed gratification to make a purchase or get something you really want, cause many of us don't need credit for the things we actually need and as HRx talked about, the peace of mind that having cash in the bank and all your bills paid lets you sleep well at night knowing debts are limited to living life, rent/cars/cell phones/ groceries/ gas for fuel etc... I have done NOTHING for credit other than paying bills on cars and things i want to keep yet did NOT reaffirm and they won't do anything until paid in full, on the credit reporting agencies. Last i checked my Fico was in the 626 with my discharge in Aug 2010.
I did not reaffirm our cars since we never really know if things will stay good for long so, i did not want to be on the Hook for the debt. that was discharged. I can walk away from my 08 Tundra anytime i have to and always stay current knowing Toyota couldn't sell it if they take it back, so i keep current yet, with rising fuel costs the thoughts of a more fuel efficient ride has crossed my mind a time or two. I plan to pay off some of the things we chose to keep paying to let them show up as paid to help with our credit in that way, since they are part of the BK. I think they will show our ability to make good on a debt we could have walked away from. We are in No hurry for any credit card at this time. and YES having better than $10K in the Bank is a very good feeling. In my work I have to save for those raining days.

Great advice and may not always work for everybody, yet credit will improve with smart living and time..

[Annie4]

I was more focused on living within or actually BELOW our means for the first year and 1/2 after our BK.

The Orchard/Capital One route seems to be working fabulously for us now. We are using the credit to our advantage, instead of the credit card companies using us this time. They can't fee us to death because we never give them any room to. It feels great after the junk we went through with some of them.

We are keeping the balance at about 1/4 of the limit and paying more than the minimum. We're also paying more often than just the monthly payment that is due when we do pay it....like every 2 weeks instead of once a month.

Would it be better to pay it all off each month and just charge a gas tank amount and pay it off each time like someone mentioned above, or do it like we are and keep a little on there all the time?

We don't really NEED to charge anything, but we want to build our credit score like everyone else, lol.

We're already getting offers for more and more. We just throw them out. I'm still VERY nervous about it.

[catleg]

Great post. The TBTF's are clowns. Cap One and Barclays are the only ones really working with the damaged consumer. Chase Citi and BofA just sit around waiting for their Federal Reserve handout every month!

Rebuilding credit is no easy task for a few key reasons.

Number 1, we're all dumb if we're in this mess. Sure we can blame hard times, or overarching necessity, but the bottom line is, think back to the beginning of your credit life. At the end of High School or College, right? And what do they teach you in college about how to handle personal finances, establish and build credit over time, and prepare yourself for financial hurdles in your future? ABSOLUTELY NOTHING! And the fine print on those credit cards and offers, well, that's so small, we don't take time to read all that, and those card companies know it.

Number 2, we're creatures of habit. We can blame circumstances, cards, or even Christmas, but the bottom line is, we're at fault because we have bad spending and credit habits.

In most cases, number 2 is caused by number 1. Unfortunately, both end up putting you in a pile of "number 2" fast in life. I've been through defaulted school loans, lease break penalties, credit card delinquencies, car loan delinquencies, unemployment and unforseen medical complications and disability, you name it! You can read about all of that all day on my personal blog I started at armchaircreditrepair. blogspot . com. I started it because I had people asking me about what I went through and what I've learned, so feel free to read it and either be bored to death or find an occasional nugget of wisdom.

One of those nuggets of learning I've had is dealing with banks, secured cards, and unsecured accounts online and elsewhere. Short story is this: The big box banks are clowns. They try to bait you in with all the promises of their credit cards and future things you can do, then do nothing to help you with your credit down the line. For example, I had a BOA account started in '04 and, although having rough financial problems at the time, started a secured card by paying like $300 for a $500 card. They refunded that to me after some time passed and I did well on my payments, but I still have to pay $30/yr for an annual fee and the % rate isn't great. The kicker is, they don't raise my credit line at all, even though I've rebuilt my score to a much better level. My point, watch out for the small ones with no room to move. Tips: Check out credit unions that may be more flexible or generous. Check out some online tradelines with an online store out there (watch for scams). I've found a few legit ones, and they've helped me quickly raise up my availability. One of them is a place called enchanted attire. Not cheap, but compared to the money I've put into that little BOA card, it's worth it, especially for the $5k line I have open with them. I enjoy some good positive credit account reporting from them for it by just putting a purchase on there about once per quarter and paying off full. I hate my BOA card and plan to ditch it soon, but only after my new credit union line for $7500 gets a few more months of history (as I said, credit union much more generous, surprisingly so for me...my mouth dropped when they said I was qualified for this, called me a "B" credit guy. In fact, I think the online account with EA probably helped raise up my score enough to get me there. I don't have much knowledge of the Orchard Bank offer but sounds ok, depends on the limit. Whatever you do, also make sure you manage your new lines and keep them positive. Like I said, we're creatures of habit, and if you are not careful, your old bad habits will re-manifest themselves!