How to Get a 700 Credit Score After Chapter 7
The tips discussed in this post should help most former Chapter 7 debtors reach a 700 credit score, which is in the “good risk” range, within four years of discharge. This seemingly impossible goal is possible largely because, contrary to popular myth, a bankruptcy filing does not “ruin” a credit score. Since bankruptcy simply makes a bad score worse, the 700 credit score mountain is easier to climb.
Nonlawyer bankruptcy petition preparers often help debtors save money in the short term. But these professionals usually abandon debtors immediately after the file. A Chicago bankruptcy lawyer, in contrast, forges a lasting relationship with bankruptcy debtors. Recovering from bankruptcy is part of the process, and a lawyer guides you through the entire process, not part of it.
Borrow Money
The action that forced many people into bankruptcy is also the action that dramatically raises their credit scores after discharge. Since a credit score is based on one’s ability to responsibly use credit, borrowing money is often the key to raising a score.
Most former bankruptcy debtors should get secured credit cards with low credit limits. A Chicago bankruptcy lawyer often steers these individuals to certain cards. If a company doesn’t add a “secured card” note to the information reported to a credit bureau, the effect is more pronounced.
No one is exactly sure what actions raise and lower scores by how much. Generally, however, each on-time credit card payment raises a score by one or two points. Use caution, because the reverse effect is much more drastic. If one payment is one day late, the result could be a ten or twelve-point drop.
We not only suggest that former bankruptcy debtors borrow money. We also suggest that they not pay the balance in full every month. If the bank charges interest on a small unpaid balance, perhaps $50, and makes a little money, it usually makes a more favorable report.
We also suggest that former bankruptcy debtors make large purchases on credit, such as an automobile. Their selection is limited and their payments are higher. But once again, the positive effect is worth the trouble.
Maintain Payments
The financial problems that caused bankruptcy were, in many cases, beyond the debtor’s control. The financial steps that raise a credit score after bankruptcy are, in most cases, completely under the debtor’s control.
If former Chapter 7 debtors want a 700 credit score, they must remain current on all obligations, come hell or high water. As mentioned, a single late payment could undo months of work. That’s especially true for credit cards, vehicle loans, and other payment information directly reported to credit bureaus.
We typically suggest that people make thirteen payments a year instead of twelve. For example, if a mortgage payment is $2,500 a month, pay $2,750 (2500 plus 250) a month. Most people won’t miss the extra money, and the benefits are significant.
A financial reserve enables debtors to withstand the next financial storm, and there will be another storm eventually. Additionally, the extra money might shave a year or more off the repayment term, saving the debtor hundreds or thousands of dollars in interest payments.
Designate the extra as unpaid principal balance reduction. Otherwise, the bank will assign the money to prepaid interest, and the debtor doesn’t get the full benefit of the extra payments.
Connect With a Savvy Cook County Lawyer
No matter what kind of financial problem you are having, bankruptcy could be a way out. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. We routinely handle matters throughout the Prairie State.
Source:
experian.com/blogs/ask-experian/how-does-filing-bankruptcy-affect-your-credit/
