How Long Does it Take to Get Credit Again after Filing Bankruptcy?
Transcript:
Matt: Hi, Matt McArthur at Clear Counsel Law Group. Common question that's presented to me is when after filing bankruptcy am I realistically going to be able to apply for credit again. The answer to this question is almost immediately. There are several different ways to get new financing, whether it's through a credit card, secured credit card, or a new car loan. The options are pretty vast considering the individual has just filed for bankruptcy. Many of my clients will often tell me after we filed their bankruptcy case that they're getting more junk mail than they've ever received and it's full of credit card offers and prequalification offers for car loans. I always caution them to be very careful with these offers because one, they've just filed for bankruptcy and the point of bankruptcy is to get out of debt; and two, because they have just filed bankruptcy, they may not qualify for the best terms for these financing options that are available to them at that time.
If you're looking at qualifying the finance the purchase of a home through a mortgage, you're more likely looking at a two to three-year time period after filing bankruptcy. Essentially, everything else though, credit cards and car loans, you're looking at almost an immediate turnaround after filing your bankruptcy case. Brian, you had a question related to this?
Brian: Would you advise people to get one credit card after filing bankruptcy to make small charges to rehabilitate their credit that way?
Matt: That's a very good question. There's different schools of thought on this. One school of thought is credit cards may be a source of weakness for you and it's better not to touch them at all. Don't even worry about your credit score. Just start going to a cash basis method where you set aside a little bit of savings and you're very meticulous and detailed with your monthly budget. You're able to then set aside a small savings and build up a rainy day fund. If you ever need to purchase something that's an emergency or something that may not fit into your monthly budget, then you then borrow for yourself in a sense and you can pay for the purchase outright rather than relying upon credit.
Now, I don't necessarily subscribe to that theory because I think that there are many practical uses of having a good score. What I would recommend is yes, getting one small card and only purchasing things on it on a monthly basis that you would be purchasing anyway, and built that into your monthly budget. For example, if you have a car and you regularly fill it up once a week, or however often that is, just decide that you're going to make all your gasoline purchases on the card and pay it off in full every month. That's going to provide you with a positive payment history after filing the bankruptcy, and it will help rehabilitate your credit score post-bankruptcy.
That would be my advice after filing bankruptcy. Do apply for one small card and don't go nuts with it, but make small, modest purchases that fit into your budget anyway and pay it off every single month. You'll see your credit score rebound or go up immediately after filing bankruptcy, and that will just help the rise of the credit score. My name's Matt McArthur, experienced bankruptcy attorney. If you're thinking about filing bankruptcy, worried about your credit score and how that may relate to the bankruptcy, please come in and see me and I'll take care of you. Take care.
