By Dethlefs Pykosh & Murphy
For many, overwhelming credit card debt can quickly spiral out of control and lead to bankruptcy. Whether you want to build your credit while avoiding credit cards or you are struggling to get a credit card after filing for bankruptcy, we have some strategies that can help.
Credit Builder Loans
Credit builder loans are a great way to build credit because you are not spending any extra money. Instead of taking out a loan and getting the money all at once, you pay off your loan before you get it! When you apply for a credit builder loan, lenders place the loan in a secure account. After making all your payments, you receive the money in the secure account. While you are essentially getting your payments back at the end of the loan, the lender reports all payments to major credit bureaus, which improves your credit.
Repay Your Existing Loans
Another way to build your credit without spending extra money is to pay off your existing loans. Some bills, like student loans, do not go away even if you file for bankruptcy. Always make your payments on time to improve your credit rating.
Report Alternate Payments
Recurrent payments like rent and phone bills can improve your credit if your landlord or phone company reports the data to credit agencies. You can also report this data to credit agencies yourself, as many creditors now consider credit from alternate sources. Experian Boost™, for example, improves your credit when you pay bills on time – even your Netflix® subscription can have a positive impact on your credit.
Understand Your FICO Score
You may be building credit even if you don’t know it. If you have any account open and on your credit report for 6 months, you will establish a FICO score. Over time and with car loans, mortgages, student loans, and even bills paid on time, your FICO score will improve.
While bankruptcy can leave a negative mark on your credit score, it can also give you the opportunity to improve your credit as you move forward. Keep your balances low and pay your bills on time, and your score could be in the 700s within just a few years.
If you’re trying to get your credit back on track, view our blogs, “Repairing Your Credit After Bankruptcy,” and “Credit: Bouncing Back After Bankruptcy” for more helpful tips.
Consider Credit Cards
Although you can build credit without credit cards, they are still a tool you can use to improve your credit – and quickly. We don’t usually encourage debtors to give up credit cards, even after bankruptcy, and secured credit cards can be a great way to rebuild credit.
If you’re considering Chapter 7 or Chapter 13 bankruptcy, Dethlefs Pykosh & Murphy can help you get a clean slate and strategize to protect your financial future.
Call our attorneys at (717) 975-9446 or contact us online to set up a consultation and get your credit back on track.