Gilbert Arizona Attorney, Lawrence B. Slater

 Filing for Bankruptcy damages your credit. But sometimes, your credit rating is better over the long run after filing for Bankruptcy!

 Consider this: if you have large debts, unpaid debts and judgments on your credit record, you will have bad credit and your low credit score will carry over for years into the future. If you file for Bankruptcy now, and discharge the debts and judgments, you will have bad credit now. But over the next 3-5 years, you will be able to improve your credit rating with good credit practices. The old debts and judgments will no longer be over your head and will no longer keep your credit score down.

Rebuild Your Credit After Bankruptcy

 Don't just wait for your credit score to rebound on its own. Be proactive. Take steps to improve your credit score. Avoid situations that lower your score. Here are some strategies:  

 Get New Credit: Start small with credit cards for department stores or gas companies. Work up to Visa and Mastercards with small balances. Get and pay off installment loans. Many people file for Bankruptcy and are offered new credit cards within a year of filing. (You can't file again for 8 years!). Consider getting a co-signer to jump start the process.

 Don't Damage Your Credit: pay your bills on time or ahead. Pay close attention to the due dates for payments! Pay off the entire balance each month if you can; and keep balances below 30% of the credit limit. Pay more than the minimum each month if you can. Don't fill out too many credit card applications. Don't be too quick to close credit cards (this may reduce available credit, or may cause a closed account with a balance, or other damage to your credit rating).

 Avoid Bad Situations: Don't take cards with excessive interest rates and fees. Don't use prepaid cards (they don't always report your payments to credit agencies!). Don't use credit cards for regular living expenses.

 Watch out for cards that look Too Good to be True: an example is First Premier, which offers credit cards with low limits to people with bad credit. You pay a monthly fee (whether you borrow or not!); you pay an annual fee; the credit limit never gets raised; and so, in the long run, it is expensive, and it doesn't build your credit. Get it if you have no other choice, but dump it as soon as you can!

 Review your credit reports: dispute incorrect information on charge-offs, balances, late payments, collection referrals, maxed out balances, and other derogatory information, if inaccurate. Dispute often! If information that is damaging and inaccurate is not verified by the creditor, it eventually may drop from your credit report and allow your score to increase. There is no damage to your credit rating when you check your own credit score.

 Build a Good Credit Score:

  Debt to income ratio: keep your monthly debt payments below 1/3 of your monthly net income.

  Credit utilization: don't use more than 30% of available credit.

  Credit mix: don't only use credit cards, have loans on your house and car, or installment loans.

  Number of credit cards: start with one, try not to get more than three credit cards.

 Set up an Emergency Fund

 It may not be easy or quick, but try to accumulate available cash to cover a month (6 months is better) of expenses, in case of emergency. We all know the worst source of funds in cases of emergency is our credit cards!

  Your FICO Credit Score

Composition of the FICO Score

  - 35% payment history: How recently you missed a payment; How many payments you missed; How long before you caught up.

  - 30% how much you owe: How close to your limits; How much of available credit you use; How much you paid down on installment loans.

  - 15% how long you have had credit: How old is your oldest account; How long is average of all your accounts. (Older/longer is better!)

  - 10% how recently applied for credit: How many accounts applied for recently; How many new accounts opened recently; How long since you applied for credit; How long since opened a new account.

  - 10% type of credit you use: What is your "mix" of loans; better is installment loans, then some credit cards, last is department store cards.

Accumulate Some Cash and Assets

  You've heard the expressions; they are all true! Cash is King! Money Talks! Show Me the Money! The Golden Rule: People with the Gold Rule!

 Don't Spend all Your Money

 Don't live paycheck to paycheck. In good months, put some money aside (into savings!) When your income goes up, keep your spending the same.

 Follow the Three Rules of Business

 1. Keep your overhead low. 2. Keep your overhead low. 3. Keep your overhead low.

 Don't Spend too much on your House

 These days (2012) it is not an investment to own a house. If you are paying more than the rental value, you are paying too much. You are paying money on an investment that will not gain value over the next 5 years or more.

 Don't Spend too much on your Car

 If you have a car, drive it until it dies, or costs too much to keep repairing. If you are buying one, ask the mechanic to recommend a make and model that lasts. I have been buying old Mercedes and BMW's over the years. They can last for 1 million miles. They look good, even when 10-15 or more years old. If you don't have a mechanic, I will recommend mine.

 Don't borrow too much for Student Loans

 Student loans can be good for education, but these days you pay a LOT and don't get much value in return. And you can't ever bankrupt the debt if things go wrong. Don't run up student loans unless you really look into the return on investment. Consider Community College for basic courses. Get value in what you pay for!

 Don't Spend too much on Furniture

 I've seen people buy a furniture set for $3500 and sell it for $350 or less. (Eeeek! That was me!) You should be the one who bought it for $350! My furniture store is now Craigslist.

 Don't put your junk into Storage

 I've seen people spend $100/month or more for years to store junk that ends up worth less money than the cost of storage. Get rid of it! When you need it again, replace it with purchases from Craigslist.

 Don't Eat Regular Meals in Restaurants

 For regular meals, shop at the grocery store or Costco and eat at the Homestead Restaurant (your house). For years, I was spending $30 each weekday for lunch. No more.

 Don't Gamble at the Casino

 There's a reason casinos are so fancy and it's not because people are winning money. The only gamble I take at the casino is to give them $25 at the buffet -- and I win a full meal every time!

 Don't even think of buying a Timeshare

 It's the most expensive free weekend you will take, when you go to the Timeshare sales meeting. Then they pressure you to pay huge amounts for a worthless Timeshare. There are people who are begging us to take the Timeshares from them for free! (So they can escape the annual "maintenance fees.")

 Don't Buy Books to Read

 Buy a 6-inch Kindle for $79. It's like reading a paperback and it can hold up to 2500 books without buying the extra memory card. Take out books for free from the internet, over the Digital Library.

If you work diligently, you can repair you credit within 3-5 years after filing for Bankruptcy.