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5 Steps to Rebuilding Your Credit

Jodi Neel • Apr 09, 2022

How to rebuild your credit after your bankruptcy case is over

1. Always Pay All of Your Bills on Time

This tip might seem obvious, but payment history is the single biggest factor in determining your credit scores and helping rebuild credit. Payment history makes up about 35% of your FICO Score calculation, so it’s very important that you make only on-time payments when working on rebuilding your credit after bankruptcy. 


Making payments on time not only adds new, positive info to your credit reports, it helps build up scores and shows future creditors that you’re a reliable borrower. Even if you only make the minimum payments, making sure they’re paid on time ensures consistent, positive reporting to credit agencies.


2. Keep Your Balances Low

This is the second biggest part of your FICO Score calculation, making up 30% of it. Careful use of credit after bankruptcy is one of the good financial habits you want to develop that is key to rebuilding credit. However, another key to your credit scores is the debt to credit ratio. This ratio is the amount of debt you have verus the amount of credit available.


Keeping the amount of debt you carry relatively low is a huge factor for lenders when they are looking at your reliability. It shows not only that your bills can be paid in a timely manner, but also that the money and credit you have available can be managed well.



3. Check Your Credit Reports Regularly

Checking your credit reports regularly is just a good credit habit to have in general. However, after a bankruptcy it’s even more important to check them regularly. You want to start checking your reports 3 to 6 months after your discharge to confirm that those accounts that were discharged are being reported as such.


Familiarizing yourself with your credit reports makes it not only easier to spot any reporting errors, but also to provide insight as to where you can make targeted improvements. 



Consumers are able to access a free copy of each of their credit reports once a year through www.AnnualCreditReport.com. We recommend that you check one of them every four months. That way you will be able to check at least one of your credit reports for free three times a year.


4. Get a Secured Credit Card

Obtaining credit immediately after a bankruptcy can be difficult. You are probably out of the running for a traditional credit card for a while. However, a secured credit is usually available to most people not too long after filing bankruptcy.


A secured card requires a deposit, typically in the $300.00 range, and the fees are usually taken out of the deposit. So if the card had an annual fee of $29.00 and a deposit requirement of $300.00, your initial credit limit would be $271.00.


A secured card is usually easier to get because it protects the lender in the event you can’t make your payment. The downside for the consumer is that they can also come with high fees and interest rates. 


But with regular use and a consistent payment history, your credit will start to see the benefits and eventually you will be able to qualify for a better, unsecured card. Some secured cards offer a conversion to unsecured after a set period, so it can be worth shopping around and checking out options. 


Even without the conversion option though, a secured credit card is one of the very best ways of repairing and rebuilding your credit history.


5. Rebuild and Repair your Finances and Avoid Bad Credit Habits After Bankruptcy

This is the part that can be the most daunting for some depending on what past habits and circumstances were at play before they had to file for bankruptcy. But, making the very difficult and sometimes intimidating choice to file for bankruptcy can be the first step to a true fresh start financially. With this blank slate in hand, this is the perfect time to really develop and put into practice those good financial habits that will help rebuild your credit and keep it there.


Lenders want to see you able to pay your bills and have some money left over, since this is a good indication that your credit isn’t at risk of being maxed out. The key is setting a budget and sticking to it. Write out a monthly budget and then see how you do trying to stay within those limits. Then, you can make sure any payments for credit you obtain and use can fit comfortably within your budget. 


With your budget set, make sure those payments are made on time. Setting up auto-pay and having reminders set elsewhere for those bills that can’t be set up on auto-pay can help guarantee timely payments. Many places will also let you pick the due date for the auto-pay as well to allow for variations in pay periods if the one they set for you isn’t convenient for your particular circumstances. 


And finally, begin to build an emergency fund. Having savings for things that may come up last minute helps not only minimizes the risk of maxing out credit lines in the event of an emergency, but it also helps contribute to financial peace of mind. It is easier to plan ahead knowing that emergencies can be handled. And it’s exactly that peace of mind we hope to help you achieve. 


Bankruptcy can feel like defeat, but it doesn’t have to be. Sometimes it’s exactly the right first step for a better future financially.


If you'd like more information on rebuilding your credit, check out this post from the Consumer Finance Protection Bureau. All you need to do is copy and paste this link into your web browser:


https://www.consumerfinance.gov/ask-cfpb/how-do-i-get-and-keep-a-good-credit-score-en-318/

  • Can you get a bankruptcy off your credit report early?

    Sadly, when you have a bankruptcy case on your credit report it cannot be removed early. If there are any inaccuracies with the bankruptcy however, you are allowed to dispute it.

  • What credit score do you need to buy a house

    For a conventional loan it is often recommended that you have a credit score of at least 620, any lower credit score usually results in lenders not wanting to work with you.

  • Can I pay a credit repair company to fix my credit?

    You can, but there is nothing that a credit repair company can do that you can't do yourself. It's not as if they have a secret backchannel to the three credit bureaus that allows them to get information removed.

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Bankruptcy Attorney Q & A- (Part 2) How Soon After Bankruptcy Can I Get an FHA Loan and Buy a House?

By Judson Carsuone • 11 May, 2022
Bankruptcy Attorney Q & A- (Part 2) How Soon After Bankruptcy Can I Get an FHA Loan and Buy a House? Clients frequently ask about future credit after bankruptcy and especially about if they will ever be able to buy a home. The answer to this question is not always as simple as it should be because it varies by the type of home loan. This blog addresses special mortgages backed directly by the federal government such as Federal Housing Administration first time home buyer and rehabilitation loans. If you do not qualify for one of these loans, you should read our related blog on conventional mortgages and buying a home after bankruptcy. Just paste this link into your browser window: https://www.oregon-attorneys.com/bankruptcy-attorney-q-a-how-soon-after-bankruptcy-can-i-buy-a-house The short answer is that a waiting period of one to three years after filing for bankruptcy is all that is required for Federal Housing Administration, Veterans Administration and US Department of Agriculture Rural Home Loans. But this is just as to the bankruptcy filing. Of course, you still need to take active steps after bankruptcy to rebuild your credit. Check out our blog posts on rebuilding your credit after bankruptcy https://www.oregon-attorneys.com/5-steps-to-rebuilding-your-credit https://www.oregon-attorneys.com/filing-bankruptcy-is-just-the-first-step-in-rebuilding-your-credit And, you have to have sufficient income, possibily a down payment and a good debt to income ratio to buy a house. A Chapter 7 or Chapter 13 bankruptcy will show on your credit report for 10 years and negatively affect your credit. However, loans targeted to special populations and backed by the federal government have rules that allow you to buy a home shortly after discharge. These rules are subject to change so we recommend that you consult a mortgage broker for the most up to date standards for qualifying. Here are the waiting periods for these loans so you can buy a house. ● If you otherwise qualify for an FHA loan, you must wait at least 2 years after a Chapter 7 discharge or 1 year after a Chapter 13 discharge. ● If you otherwise qualify for a VA loan, you must wait at least 2 years after a Chapter 7 discharge or 1 year after a Chapter 13 discharge. ● If you otherwise qualify for a USDA loan, you must wait at least 3 years after a Chapter 7 discharge or 1 year after a Chapter 13 discharge. In addition, if you are in a Chapter 13 plan and you need to refinance, then FHA and VA can also help you. FHA loans used to refinance a home while in a Chapter 13 bankruptcy require up to 2 years of on time payments to the Chapter 13 trustee. You must also meet the other loan standards such as sufficient income and appropriate loan to value ration. But the loan proceeds must allow you to conclude your Chapter 13 plan as of the closing of the loan. We sometimes call this buying out your plan. This can work well if you have the equity. It is also possible to use VA loans to refinance a home while in a Chapter 13 bankruptcy. You need up to 2 years of on time payments to the Chapter 13 trustee. You must also meet the other loan standards such as sufficient income and appropriate loan to value ration. But you do not need to buyout your plan. Here is a brief description of these home loans. ● FHA first time home buyer loans allow for a low down payment currently at 3.5% with a credit score at or above 580, or 10% if your credit score is between 500-580. The property needs to pass an inspection. And there is a cap on these loans that varies by county. For example, a home in Lane County can qualify up to $420,000 but in Multnomah County that amount is $598,000. ● FHA rehabilitation loans have similar standards. However, the loan can include cash out to bring the home up to the required inspection standards. The cash out is limited to $35,000 for qualifying improvements such as replacing roofing, enhancing accessibility for a disabled person or making energy conservation improvements. ● VA loans for new home purchase start with a Certificate of Eligibility (COE) to show your lender that you qualify based on your service history and duty status. This is obtained from the VA. The VA does not always require a down payment but one may be needed depending on the amount of the loan. The property needs to pass an inspection. But unlike the FHA, the VA does not set standards for the loans as to credit or income. Typical lenders do want minimum credit scores in the 600 range. ● USDA rural home loans do not require a down payment. But the home and its location are essential to obtaining this type of mortgage. For example, the house size is usually 2000 square feet or less. In fact, the home buyer must need the home to have decent, safe, and sanitary housing and be unable to obtain a loan from other resources on terms and conditions that can reasonably be expected to be met. Income qualifications are lenient as the loan can include a payment subsidy and are only available to low income borrowers. The USDA doesn't have a fixed credit score requirement, but most lenders require a score of at least 640, and 640 is the minimum credit score you'll need to qualify for automatic approval through the USDA's automated loan underwriting system. Conventional loans require a longer waiting period between bankruptcy discharge and requesting a home loan. These types of loans are not guaranteed by the federal government and can require significantly longer waiting periods. But your state or local government may have other programs that can also help. And a bank involved in the Community Reinvestment Act (CRA) will also have loans available for low to moderate income home buyers. Finally, if you were impacted by recent fires and lost your home in such a disaster, the Small Business Administration and FEMA may have loan options to rebuild. Filing bankruptcy is usually just the first step to rebuilding your credit and putting yourself back on track to possible home ownership in the future.

Bankruptcy Attorney Q & A - How Soon After Bankruptcy Can I Buy a House?

By Judsone Carusone • 11 May, 2022
Bankruptcy Attorney Q & A - How Soon After Bankruptcy Can I Buy a House? Clients frequently ask about their future credit ratings after bankruptcy and especially about being able to get a mortgage to buy a house. The answer to this question is not always simple as it varies by the type of mortgage. This blog addresses conventional home loans. If you qualify for a FHA or VA loan, you should read our related blog. Just pasted this link into your browser window https://www.oregon-attorneys.com/bankruptcy-attorney-q-a-part-2-how-soon-after-bankruptcy-can-i-get-an-fha-loan-and-buy-a-house The majority of conventional home loans are sold with in 6 months by the original lender. Fannie Mae and Freddie Mac are the largest purchases of these home loans, buying upwards of 65% of the annual home loans. We call this the secondary mortgage market. The rest of these loans are purchased by banks, hedge funds and asset backed trusts. Over the life of a 30 mortgage, it may be sold several times. A bankruptcy or other major negative credit event will create a waiting period before you qualified for a home loan that can be purchase by Fannie Mae or Freddie Mac. Many original lenders want the home loans qualified for purchase by Fannie Mae and Freddie Mac. So they try to meet Fannie Mae and Freddie Mac standards in all cases. Here are the waiting periods for these home loans to be qualified for purchase by Fannie Mae and Freddie Mac. • A Chapter 7 or Chapter 11 Bankruptcy waiting period is 4 years from the discharge or dismissal date of the bankruptcy action. A 2 year waiting period is allowed if extenuating circumstances are documented. • A Chapter 13 Bankruptcy waiting period is 2 years from the discharge date or 4 years from the dismissal date. This shorter waiting period after discharge recognizes that borrowers have already met a portion of the waiting period within the time needed for the successful completion of a Chapter 13 plan. A borrower who was unable to complete the Chapter 13 plan must wait 4 years. A 2 year waiting period is allowed if extenuating circumstances are documented as to a dismissed case. • A borrower who filed more than one bankruptcy within the past 7 years has a 5 five-year waiting period from the most recent dismissal or discharge date. However, two or more borrowers with individual bankruptcies are not cumulative, and do not constitute multiple bankruptcies. For example, if the borrower has one bankruptcy and the co-borrower has one bankruptcy this is not considered a multiple bankruptcy situation requiring a 5 year waiting period. A 3 year waiting period is allowed if extenuating circumstances are documented and is measured from the most recent bankruptcy discharge or dismissal date. But the most recent bankruptcy filing must have been the result of the extenuating circumstances. You still need to rebuild your credit and avoid accumulating a lot new debt to before you can buy a house. And you have to have sufficient income and a good loan to value ratio to buy a house so you can meet the standards to qualify for a home loan. Check out our blog posts on rebuilding your credit after bankruptcy. Just paste these links into your browser window: https://www.oregon-attorneys.com/5-steps-to-rebuilding-your-credit https://www.oregon-attorneys.com/filing-bankruptcy-is-just-the-first-step-in-rebuilding-your-credit These bankruptcy waiting periods may or may not be better then the alternatives. Here are the waiting periods for non-bankruptcy major negative credit events. • Foreclosure requires a 7 year waiting period measured from the completion date of the foreclosure action as reported on the credit report or other foreclosure documents provided by the borrower. A 3 year waiting period is allowed if extenuating circumstances are documented. • Foreclosure and Bankruptcy on the Home Loan. If a home loan was discharged through a bankruptcy, the bankruptcy waiting periods is applied if the new lender can document that the mortgage obligation was discharged in the bankruptcy. Otherwise, the greater of the applicable waiting periods applies. • Deed-in-Lieu of Foreclosure, Pre-foreclosure Sale (often called a short sale), and Charge-Off of a Mortgage Account require a 4 year waiting period from the completion date of the deed-in-lieu of foreclosure, pre-foreclosure sale, or charge-off as reported on the credit report or other documents provided by the borrower. These events are alternatives to foreclosure. A 2 year waiting period is allowed if extenuating circumstances are documented. • A deed-in-lieu of foreclosure is a transaction in which the deed to the real property is transferred back to the servicer. These are typically identified on the credit report through Remark Codes such as “Forfeit deed-in-lieu of foreclosure.” • A pre-foreclosure sale or short sale is the sale of a property in lieu of a foreclosure resulting in a payoff of less than the total amount owed, which was pre-approved by the servicer. These are typically identified on the credit report through Remark Codes such as “Settled for less than full balance.” • A charge-off of a mortgage account occurs when a creditor has determined that there is little (or no) likelihood that the mortgage debt will be collected. A charge-off is typically reported after an account reaches a certain delinquency status and is identified on the credit report with a manner of payment (MOP) code of “9.” Additional requirements may apply, especially when seek a shorter extenuating circumstances period. Only the purchase of a principal residence is permitted. Only limited cash-out refinances are permitted. You may need a larger down payment. For the purchase of second homes or investment properties and large cash-out refinances you must wait the full 7 years. These rules are subject to change, so one should consult a mortgage broker for the most up to date requirements for buying a home.

Questions You Will be Asked at Your Meeting of Creditors

By Judson Caruson • 30 Apr, 2022
Most people are very worried about their Meeting of Creditors and about what kind of question they will have to answer. Here is the list of required questions and suggested general questions based on a list that has been prepared by the US Trustee's Office. SECTION 341(a) MEETING OF CREDITORS REQUIRED STATEMENTS/QUESTIONS The following statements and questions are required. The trustee shall ensure the debtor answers the substance of each of the questions on the record. The trustee may exercise discretion and judgment in varying the wording of the statements/questions, if the substance of the questions is covered. 1. State your name for the record. Is the address on the petition your current address? 2. Please provide your picture ID and Social Security number card for review. 3. Did you sign the petition, schedules, statements, and related documents and is the signature your own? Did you read the petition, schedules, statements, and related documents before you signed them? 4. Are you personally familiar with the information contained in the petition, schedules, statements and related documents? To the best of your knowledge, is the information contained in the petition, schedules, statements, and related documents true and correct? Are there any errors or omissions to bring to my attention at this time? 5. Are all of your assets identified on the schedules? Have you listed all of your creditors on the schedules? 6. Have you previously filed bankruptcy? 7. What is the address of your current employer? 8. Is the copy of the tax return you provided a true copy of the most recent tax return you filed? 9. Do you have a domestic support obligation? (If so, you must complete a domestic support obligation form that your lawyer will provide. It requires that you list to whom you owe the obligation including the claimant’s address and telephone number.) Are you current on your post-petition domestic support obligations? 10. Have you filed all required tax returns for the past four years? SAMPLE GENERAL QUESTIONS To be asked when deemed appropriate. 1. Do you own or have any interest whatsoever in any real estate? If owned: When did you purchase the property? How much did the property cost? How much do you owe on it? What do you estimate the present value of the property to be? Is that the whole value or your share? How did you arrive at that value? Have you owned any real estate in the last 4 years that is not in your name now? If so, what happened to it. If it was sold, how much did you receive from the sale and what happened to those proceeds. If renting: Have you ever owned the property in which you live and/or is its owner in any way related to you? 2. Did you purchase or refinance a vehicle in the last 6 months? If yes, you will be required to provide a copy of the purchase agreement and registration to the trustee. 3. Does anyone hold property belonging to you? If yes: Who holds the property and what is it? What is its value? 4. Do you have a claim against anyone or any business? If there are large medical debts, are the medical bills from injury? Is there anyone you could sue? Are you the plaintiff in any lawsuit? What is the status of each case and who is representing you? 5. Are you entitled to life insurance proceeds or an inheritance as a result of someone’s death? If yes: Please explain the details. If you become a beneficiary of anyone’s estate within six months of the date your bankruptcy petition was filed, the trustee must be advised within ten days through your counsel of the nature and extent of the property you will receive. 6. Does anyone owe you money? If yes: Is the money collectible? Why haven’t you collected it? Who owes the money and where are they? 7. Have you made any large payments, over $600, to anyone in the past year? 8. Were federal income tax returns filed on a timely basis? When was the last return filed? At the time of the filing of your petition, were you entitled to a tax refund from the federal or state government ? If yes: Inquire as to amounts. If you received your refunds before your case was filed, what did you do with them? Did you give any of them to family or friends? 9. Do you have a bank account, either checking or savings? If yes: What were the balances in each account as of the date you filed your petition? 10. When you filed your petition, did you have: a. any cash on hand? b. any U.S. savings bonds? c. any other stocks or bonds? d. any certificates of deposit? e. a safe deposit box in your name or in anyone else's name? f. any crypto currency? 11. Do you own an automobile? If yes: What is the year, make, and value? Do you owe any money on it? Is it insured? 12. Are you the owner of any cash value life insurance policies? If yes: State the name of the company, face amount of the policy, cash surrender value, if any, and the beneficiaries. 13. Do you have any winning lottery tickets? 14. Were you divorced in the last 4 years. If so, is there anything that it still owing to you are a result of that divorce. If you are married and your spouse is not part of this case, do they have any property in their name not listed on your asset schedules. If you were to be divorced or separated, do you anticipate that you might realize any property, cash or otherwise, as a result of a divorce or separation proceeding? 15. Have you been engaged in any business during the last six years? If yes: Where and when? What happened to the assets of the business? 16. Have you made any transfers of any property or given any property away within the last four year period ? If yes: What did you transfer? To whom was it transferred? What did you receive in exchange? What did you do with the funds?
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