| Making Bankruptcy Work
for You
It may not seem like it, but bankruptcy can work for you if you want it
to. Even though your bankruptcy will remain on your credit report, you
can rest assured that you are not going to be marked for life. In fact,
you will find that many companies will work with you even with a
bankruptcy on your credit report.
It is important to note however, that there will be some barriers to
your getting back on your feet. Rebuilding your credit takes some effort
and strategy on your part, but it is not impossible. You can turn the
bankruptcy to your advantage. This section will show you how.
1. Deleting Credit Report Errors in 48 Hours
This is the absolute fastest way to correct any mistake that are made on
your credit report and raise your credit score at the same time.
However, you can’t do this yourself. It can only be done through a
mortgage company or a bank. If you apply for a bankruptcy home loan and
find errors on your credit report, you can ask the loan officer to
conduct a Rapid Rescore. However, you must be sure not to do this every
time you apply for credit or you can find yourself in bigger problems.
The Rapid Rescore strategy will take some time however because it
requires proper paperwork. For starters you will need proof that the
item is incorrect. To do this, you will have to get the creditor to
admit such on your behalf. For example, you can get a letter stating
that the account is not your account, a letter stating the account was
paid, a release of lien notice, a satisfaction of judgment, a bankruptcy
discharge, a letter for deletion of collection account or anything else
that will substantiate your claim.
This is the same type of documentation that a bank or mortgage company
would require from you for the credit accounts anyways. The difference
is, now you can improve your credit score and receive a lower interest
rate with it instead. The results are not guaranteed and will run you
about $50 per account, so you should really be wary about taking
advantage of it.
2. Deleting Bad Credit
This is the most area where you've heard of all the scams reported
before. Credit repair clinics charge a huge fee for their services and
promise you a clean credit report. Sometimes they even claim that they
can give you a new credit profile! People are now spending hundreds, or
even thousands, of dollars for something they can do themselves, which
just ticks me off. Why? Most people don’t realize that they can clear up
their credit on their own.
Removing your credit errors is simple. Deleting negative credit that is
accurate requires some help. Credit report mistakes easily disappear by
using a simple dispute letter. It’s that simple. If you have the
paperwork proving that the error is real like I said above in Rapid
Rescore, send copies of that along with the dispute letter. This will
make the credit bureau's job easier and you will get your results
quicker.
If you don't have the documentation to prove that there are mistakes,
you should send the dispute letter anyway. According to federal law; the
credit bureaus have a reasonable amount of time to validate your claim.
They will have to contact the creditor for verification of your dispute.
From here the account will be reported properly or it will be deleted.
It has been generally accepted that the reasonable amount of time is
about 30 days.
3. Ride Someone Else’s Credit Coat Tails
This is a fast and little known way to boost your credit score. But it
requires a very trusting relationship. Basically, someone else will have
to add you to their credit account for this to work. For example, when
you are applying for a credit card, you may have seen the section to add
a card holder. This is where you will want to add someone to your
account because their payment history is now going to be reported on
your credit report too. If they have perfect credit, now you will also
have a perfect credit account.
If you want to make this even better, use an aged account. What I mean
by this is that if your friend or family member has a 10 year old credit
card account with a perfect payment history and a balance of only half
of the credit limit that means that this will become part of your credit
history as well. The easy part about this is that this person just calls
the credit card company and requests a form to add a cardholder.
After this is done and the account is activated, their entire account
history and future is now completely attached to your own. If you could
secure 3-5 of these accounts; particularly if they are installment
accounts your credit will reach the sky.
The hardest part of doing this is finding someone who has the good
credit that will be willing to add you. Think about it; you already have
a low credit score and bad credit, how eager do you think someone will
be to make you a joint cardholder? Even your parents don't want you to
damage their credit.
Here’s how you can get them, you do not need to possess the card, and
you just need your name on it! In other words, the person who adds you
could add you as a card holder and never give you the card or PIN or any
information on it. Since the bills and all account information are still
going to be sent to the person’s address, you won't know anything about
the account. Explaining this to people could give you many people who
are willing to do it. And you still benefit with a higher credit score.
4. The Round Robin Plan
This strategy is one of the oldest credit building tricks you can pull.
It used to be handled through secured savings accounts. But now, it's
much easier to do because they have secured credit cards. In fact, I've
used this method myself.
Here's how it works: Take $1,000 (or whatever you can afford) and get a
secured credit card. Once you get the card, get a cash advance of 70% of
your credit limit. Now get a second secured credit card. Once you get
this one, you will want to get a cash advance of 70% of your credit
limit on this card. Use the money to get a third secured credit card.
Once you get the card, get another cash advance of 70% of your credit
limit.
Now that you are finished getting the cards, you will want to open a new
checking account with the final cash advance. You will use this account
only for making payments on your three new credit cards. If you make
your payments on time every month, your credit score will get better
because you now have three new perfect payment credit cards.
It is important that I point out that at first, your credit score might
drop a few points because of the fast, and multiple accounts being
opened. However, if you wait for about 4 months and have no new accounts
or any delinquencies of any account, you will see your credit score
increase.
5. Pay on Time
This one is kind of obvious, but I can not stress this any further. If
you don’t your credit score will decrease. This happens no matter how
late your payment is. For some reason people still think that if they
are only a few weeks late, it’s all good. Well, for the loan company, if
you pay late but consistent, they make a lot more money with late fees
and more interest. For you, this means lower credit score. If you think
in the long-term and credit score, you will see what I mean.
6. Pay Down Your Debts
You have to remember that you’re dealing with high-level statistics and
probabilities which evaluate and forecasts trends in your paying
behavior. You can never pay off your revolving debt completely. Think
about it. Your credit score is a reflection of your ability to manage
your credit. If you pay off your debt you are not managing your debt.
If you maintain a balance of nothing, you have nothing to manage. It no
longer exists. And you cannot manage what is not there. Therefore, when
you are thinking in terms of credit score, you have demonstrated your
ability to swiftly pay off accounts so that you can avoid managing them.
Don’t get me wrong; if you're over extended to begin with you will want
to pay off what's necessary to make your credit profile look great. Then
you need to manage the remaining credit. That is how you decrease your
credit score. Creditors want to know that you can manage your credit
account so you have to have a balance to do that.
7. Don't Close Any Accounts
Even if you pay off continually revolving debts, do not close the
account completely. The longer an account is open with no negative
reports on it, the better it reflects in your overall credit score. This
occurs because the creditors weigh in the averages in the credit score
formula. Many credit experts will tell you to maintain a balance of 30%
of your credit limit. However if you keep it at 70% you will still keep
a healthy credit score.
8. Don’t get New Credit
You have to steer away from getting any new credit unless it is
absolutely necessary. Every time you apply for credit, an inquiry is
added to your report, and every inquiry that is made drops your credit
score. When you have fresh credit, there is no track record how you will
manage your credit account. Why risk the drop? You have to remember,
your credit score is about risk assessment.
You should get credit for your housing, transportation, college or
continued education and 3-5 credit cards. That's really all you need
anyway unless extravagant spending is what you’re looking for. If you
want more credit, request an increase on your current cards rather than
apply for new ones.
9. Mix Credit Types
If you show creditors that you can handle different types of credit at
the same time, you are rewarded with a great credit score. To do this,
get installment loans for car, personal loan or mortgage. Get revolving
credit as well like credit cards: Visa, MasterCard, Gas cards,
department stores, etc. By mixing it up, you will be able to demonstrate
that you can manage your credit because you will have short term and
long term credit with a fixed payment plan in place.
Keep these accounts open with a balance of 70% or less and be sure to
pay them on time and watch your credit score soar.
10. Don't File For Bankruptcy or Foreclosure
Here's the most obvious advice: Don't file for bankruptcy or foreclosure
if you can avoid it. These reports will stay on your credit report for
10 years and always decrease your credit score. If you are looking to
quickly rebuild your credit history after a bankruptcy or foreclosure, I
would recommend that you use the Round Robin strategy that I mentioned
above and get secured credit cards. Now you can even get a car loan or
mortgage right after bankruptcy.
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