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Establishing good credit after personal bankruptcy

For many in California, one of the primary objections to seeking bankruptcy protection is the belief that bankruptcy will permanently ruin one's credit. While it is true that personal bankruptcy will have an initial negative impact on the credit scores of the filer, it is important to understand that credit repair can begin immediately following a bankruptcy. In many cases, an individual who takes an aggressive credit repair approach can attain a higher score several years following a bankruptcy than an individual who does nothing to remedy their financial strain.

One of the first steps in credit repair is to acquire a current copy of one's credit report from the three top credit reporting bureaus. Everyone is entitled to a free credit report each year. Once these reports are in hand, check carefully to make sure that there is nothing included that is inaccurate, and be prepared to go through the dispute process if there are errors within any of the reports.

Next, be sure to pay all bills on time once the bankruptcy process is complete. This includes any accounts that were not discharged through the bankruptcy, as well as any new lines of credit. Making timely payments is one of the best ways to boost credit scores. If staying on track is a challenge, consider setting up automatic bill payment options, which can help avoid any late payments.

It is also important to demonstrate an ability to manage debt wisely in the months and years following a personal bankruptcy. Take care to keep credit card balances below 30 percent of the available credit limit. Never feel pressured to take on more debt than is comfortable. Above all else, evaluate new offers of credit carefully, and avoid signing up for accounts based on an initial rebate or special offer.

By using these and similar financial management tips, California residents should be able to make great strides in establishing a positive credit score after a personal bankruptcy action. It may take a measure of time and effort, but it is possible to achieve good credit after bankruptcy. For consumers who have held off on seeking bankruptcy protection due to worries about future credit standing, this information may make the decision to file easier.

Source: Forbes, "8 Tips For Getting And Keeping Good Credit", July 7, 2015

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Thomas F. Miles, Attorney and Counselor at Law
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