Three Quick Ways To Rebuild Your Credit Score In Illinois

By the time they file bankruptcy, most debtors have average to poor credit scores. Repeated late payments, as well as charge-offs and other negative information, quickly reduce your credit score. These people usually see about a 130-point drop when they file their voluntary petitions. So, almost instantly, their credit scores go from bad to worse. Quite understandably, rebuilding credit, at least to the place it was before, is a big priority for these families.

The bankruptcy filing notation usually remains on your credit report for at least seven years. However, the practical effect of that filing could dissipate within a few months, if you work hard to rebuild your score. A Chicago bankruptcy attorney plays an important role in this process, both during and after the case.

Renegotiate Loan Terms

Bankruptcy does more than stop adverse actions, like repossession and foreclosure, and wipe out the obligation to repay most unsecured debts, like credit cards and medical bills. Bankruptcy also wipes away the loan and other repayment agreements that debtors had before they filed. All the loan terms, such as the interest rate, must be renegotiated.

Most lenders quickly send reaffirmation agreements to debtors’ attorneys. Usually, these documents are only about two or three paragraphs long. They simply state that the parties agree to renew all loan terms as originally agreed.

Signing the reaffirmation agreement without negotiating could be a good idea. Sometimes, it’s better to get these things over with. However, in other cases, this quick reaction might cost the debtor money. Interest rates are incredibly low right now. So, an attorney can often reduce the loan’s interest rate. Even a point or two could save the debtor thousands of dollars a year. That savings makes it easier to borrow money and raise your credit score, as outlined below.

Remain Current on Secured Debts

Paying your bills on time, especially debt payments which are reported straight to the credit bureaus, make up a significant chunk of your credit score. So, it is important to remain current on mortgage loans, car payments, and all other similar payments, come hell or high water.

Many people build a financial reserve by making thirteen payments a year. Most families do not miss the extra $50 or so a month. After a few months, the reserve is large enough to weather a small financial storm, like a brief job loss. Alternatively, the reserve gives the debtor some leverage. Many lenders are willing to defer a payment or two until the end of the loan, if the debtor has a good payment history.

Incidentally, be sure to designate the extra money as a principal payment. Make this designation in writing with each payment. Otherwise, the bank will probably credit the money to prepaid interest. So, you don’t get additional equity in the property.

Responsibly Borrow More Money

An attorney connects former bankruptcy debtors with lenders who work with damaged credit borrowers. Responsibly borrowing money is an excellent way to raise your credit score.

A new car is a good example. Your shopping choice could be limited and you will almost certainly pay a higher interest rate than other buyers. But the lender will most probably say “yes.” With every on-time payment, your score goes higher. Plus, you will have a new ride.

Connect with Diligent Cook County Lawyers

You have the power to raise your credit score after you emerge from bankruptcy. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. Convenient payment plans are available.