Rebuilding credit in a 13

[suzisbroke]

Does anyone know how to rebuild credit in a 13? Can you have a small credit Card for gas and such as long as it is paid in full each month or do you have to wait till you are out of your 13 to even start building your credit up.

[SMinGA]

It depends on what your district/trustee requires. They may require TT approval for ANY new debt, or just for debt over $X dollars. If you're given a limit of $500 for example, you could take out a $300 secured credit card without issue I think.

Personally, I'm not ready to think of the rebuilding part just yet. Maybe in a few years, about the mid-way point?

[Lissy]

Didn't I read somewhere that simply making your payments to the TT each month on time can help raise your credit score? I'm hoping so because I don't plan to ever have another credit card. The only debt I will ever carry again is a car loan and maybe a home loan one day.

[SMinGA]

I doubt it. Its not credit for one thing. Over time as your BK gets older that could improve your score a little. Old public records would be less harmful than recent public records.

One downside to credit scoring is that revolving credit (credit / store cards) do more to boost one's credit score than installment loans. I think its a matter of control. If you have a car loan, there is a certain motivation to pay as you want to keep the car. But for a credit card, you don't have the same motivation. If you keep a card at a low balance, it shows that you can manage to not overspend even though you have the open available credit. I imagine that is why revolving accounts have such a big impact on credit score at least. My theory only.

Ultimately though its really only important for major purchases: car, home loans. And for home loans there may be some loan programs where credit score itself is not the determining factor in your rate. I've heard FHA loan rates are not score based - don't know the specifics though.

Didn't I read somewhere that simply making your payments to the TT each month on time can help raise your credit score? I'm hoping so because I don't plan to ever have another credit card. The only debt I will ever carry again is a car loan and maybe a home loan one day.

[lrprn]

Does anyone know how to rebuild credit in a 13? Can you have a small credit Card for gas and such as long as it is paid in full each month or do you have to wait till you are out of your 13 to even start building your credit up.

In Ch 13 you are not allowed to create new debt without the prior permission of your trustee. A new credit card is new debt.

You need to wait until your Ch 13 is successfully discharged to apply for a new credit card.

Keep in mind that credit cards are not the only way to increase your credit score. Consistent ontime payments help as do older loans that were paid off in full before filing. Truly the only real way to increase your credit score is the passage of time. Give that a chance before jumping back into the debt swamp again before your 13 is even over.

[pete42]

lrprn, I agree but it's funny because both attorneys I went to told me that they've both had clients that held an emergency cc during their chapt13 and the tt never said anything.