When Can I Start Rebuilding My Credit after a Bankruptcy?

How Soon Can You Start Reestablishing Credit after Bankruptcy?

If you’ve had to file bankruptcy, for any reason whatsoever, you may be wondering how soon you can start to rebuild your credit, as well as the best ways to do so.

You Can Start Immediately

There are no legal restrictions on how soon you can begin to reestablish credit after a bankruptcy. Though you may find fewer opportunities to do so, and incur greater expense, there are companies that will take the risk. You should understand, though, that the interest rates and penalties assessed to sub-prime borrowers (which you will be after a bankruptcy filing) are significantly higher than for most borrowers.

The reality, though, is that you should take some time to get on your feet before you try to incur any new and significant debt. By simply paying your existing obligations—rent, utilities—in a timely manner, you start to rebuild your creditworthiness.

Depending on the type of bankruptcy you filed, you may actually become more attractive to some lenders after a bankruptcy. In fact, it’s pretty common for persons who’ve just completed a bankruptcy to start receiving offers for credit cards, often within a month. Some may be secured credit cards—where you must deposit a certain amount to have the card—but they can help you begin to rebuild yoru credit. The key is making payments in a timely manner.

If you filed Chapter 7 liquidation, your debt-to-income ratio, one factor considered by lenders, will be dramatically reduced. If you have income, but little debt, a lender may perceive that you can afford to take on a new obligation. You can reap the same benefit in Chapter 13, but it typically takes longer, as you will be paying down existing debts over a three-to-five year period.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

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