The Consumer Rights Bill & Rebuilding Your Credit After Bankruptcy
There is no way around the fact that bankruptcy is going to impact your credit score.
However‚ L. A. bankruptcy lawyers know that with some careful planning and the adoption of a few smart spending and savings habits‚ you can minimize that impact.
Part of that plan involves boosting your credit by securing new lines of credit and faithfully paying them on time each month. What you may not realize‚ though‚ is that not all your bills are created equally. This means that some of these expenses won’t help your credit at all.
That doesn’t necessarily mean you can do without them‚ and you certainly can’t afford to pay them late or not at all. But it’s important to understand which bills really matter when you’re trying to regain your financial footing.
First‚ you need to understand your credit score. If you are contemplating bankruptcy or if you are already in the process‚ you probably have a good idea of what your score is. The most commonly used score is what’s known as a FICO score. This is essentially an algorithm that determines your creditworthiness‚ or likelihood of repaying a bill‚ based on a number of factors‚ including your payment history‚ amounts owed‚ length of credit history‚ types of credit used and any new credit you are seeking. Your FICO score is expressed in a number between 350 and 850. The higher your score‚ the better.
So payment history is what we’re talking about in this case. It represents about 35 percent of what determines your score. The idea is that when you maintain a good payment history with your creditor‚ that will be reported to the credit bureaus and result in a higher score. If‚ however‚ you don’t pay on time or your record is spotty‚ that will be reported as well‚ and will drag down your score.
But here’s the thing (and it’s really important when emerging from a bankruptcy): Some creditors report all of the bad and none of the good.
Some of those type of creditors include:
- Your cell phone company;
- Your doctor’s office or hospital;
- Your landlord;
- Your utility company;
- Your car insurance company;
- Your federal and state government (with respect to tax liens).
So for example‚ your medical bills won’t be reported to the credit bureaus if you’ve been paying in full‚ on time. However‚ if you don’t pay‚ that bill is sent to a collection agency‚ where it will then be reported as a negative on your credit score. A few health care providers will send delinquent bills to collection agencies with the provision of not reporting them to credit bureaus‚ but that’s actually pretty rare.
Rent is another one where you won’t get credit for paying on time‚ but you can face immediate consequences if you don’t. You do have to be particularly careful with this one because landlords are notorious for immediately filing small claims to collect unpaid rent. If they win‚ they can sell it to a collection agency‚ which will then be reported to the credit bureaus. This could make it very tough to find a new place to rent.
There are also some random creditors that would fall into this category as well: magazine subscription providers‚ gym memberships and DVD clubs.
The bottom line is that more often‚ legitimate companies are willing to give people another chance after they have filed for bankruptcy. They might not offer the best terms in the beginning‚ but it’s only temporary.
If you have questions about where to start‚ we can help.
If you are considering a Chapter 7 bankruptcy in Los Angeles‚ contact Nader‚ Naraghi & Woodcock‚ APLC to schedule your free consultation. Call (800) 568-0707.
Which Bills Help you Rebuild Your Credit? Sept. 18‚ 2012‚ By Justin Harelik‚ Fox Business