Credit Repair After Bankruptcy

Repairing Your Credit after Bankruptcy

by Deborah Dera,
 

Bankruptcy. It's a scary word. The reality of the situation, however, is that bankruptcy doesn't have the same social stigma it once had. The fact that a person has filed for bankruptcy doesn't make him a bad person – more likely the victim of unfortunate circumstances. Still, recovering from bankruptcy can be a difficult task, especially if you don't know where to start. 

Let's look at things in a positive perspective. While a bankruptcy filing will show on your credit report for several years, having it on your report will not make it impossible for you to obtain new loans or other forms of credit later on. As time goes on, more and more companies  will become willing to offer you credit – especially if you do a little bit of work to increase your credit score. 

Review Your Credit Report 

The very first thing you need to do is obtain a copy of your credit report. Review each and every item, line by line. Take the time to research and challenge anything that is incorrect. You may, for example, find evidence of an account you never opened. I once found a credit card for a gas company on my report but it didn't belong to me – it belonged to my dad and had been opened at a time when I still lived at home.  

You'll also want to make sure that any of the creditors included in your bankruptcy have noted your account as closed. Your creditors may have sent your information to collections, in which case those agencies may show up on your report as a separate listing. Make sure all of the accounts associated with your bankruptcy, no matter how far removed from the original debt, are closed. 

Focus on Your Utilities 

Take a look at your utility bills and determine which utility companies report to the credit bureaus – some do. Focus on paying these bills in a timely manner each and every month. Paying your bills on time will slowly but surely increase your depleted credit score and will show your creditors (current and future) you are financially responsible. 

Secured Credit Cards 

Applying for a secured credit card is another great way to show you are serious about repairing your credit score. Secured credit card companies will require you to place a deposit in the amount of your credit limit. If you don't pay the bill, you'll lose your deposit. If you do pay the bills on time, you'll likely get most or all of your deposit back after a specified period of time. It may seem expensive at first, but obtaining a secured card is one of the least risky methods for obtaining new credit and these companies will report to the credit bureaus just like any other. 

Store Credit Cards 

Because of the limited way in which they can be used, store credit cards are often easier to obtain than credit cards from major banks. Keep your aforementioned secured card for at least a year. Then apply for a store credit card. Your ability (or inability) to get a store credit card will give you an idea as to whether or not you are ready to apply for an unsecured credit card from a major bank. 

Purchase a CD 

If you have cash on hand, you may want to consider opening a CD at your local bank. The first thing you need to do iis find a bank that will a) allow you to use a CD as collateral on a loan and b) report your loan payments to all three major credit bureaus. You'll open a CD, wait at least a month or two, and then use the CD as collateral to open a loan account with the same bank.  

You won't use the loan money to make any sort of purchase. You'll simply put it in an account and use it to pay back the loan over a brief period of time. You will end up paying interest on the loan, but it's a small price to pay to increase your credit score after a bankruptcy.  

Obtain Credit Counseling 

Yes, you had to do pre- and post- bankruptcy credit counseling before you could get your discharge but consider that the first step. You should seriously consider talking to a real credit counselor about some of the other things you can do to improve not only your credit score but your overall financial situation. Your counselor may be able to suggest some simple changes to your lifestyle you might not have otherwise thought of.  

Work at your credit score slowly but deliberately. Before you know it, your bankruptcy will be a thing of the past and your financial future will be brighter than ever.

Deborah Dera is a full-time professional writer focusing on topics such as personal finance, bankruptcy, education, online degrees, search engine optimization, blogging, and more. She's the founder of Write on the Edge and offers unique content creation solutions to business owners who want to enhance their brands online.

2009-07-05 issue:

A bond is a guaranteed financial loss. How the heck this is "safe" escapes me.

Why is a bond a guaranteed financial loss? A bond is not equity, it's debt. It creates no value. For that reason, it can never return enough to outpace inflation. While "investing" in a bond is safer than hoarding Federal Reserve Notes (the cotton "dollar bills" that people erroneously refer to as "paper money") and much safer than making an equity "investment" (stock) in something you know little about, it's not safe.

Stocks are safe, only if you understand what you are buying. Since stock is an equity (ownership) investment, it holds the potential to outpace inflation. You have to remember that you are buying ownership in an income-producing asset. You need to evaluate that asset before buying, and you need to understand the risks of ownership.

Unless you understand the products, management, market, and competitive environment of the company you are buying stock in, you are merely gambling. Since most people lack the education, information resources, time, and perseverance to understand these things, most people should not buy individual stocks. Mutual funds, yes--but only if you understand the management and the fund philosophy. If you are merely chasing returns, you are gambling.

What else can you do? Some obvious investments include:

• Invest in training and education so you qualify for higher income (proven: this works).
• Invest in your health, so you don't have disease accommodation bills (what we call "healthcare" bills).
• Invest in your mind by reading books, so you have brainpower, attention span, and knowledge.

Most people don't think of those three things as investment, but they should. Most people think in terms of buying something. OK, so let's go there.

In 1983, I read a book that profoundly influenced my thinking on investing. It talked about buying things on sale, and stocking up when you do. This was something my parents did, and though I didn't think of that in terms of investing, I followed this pattern more or less. However, you can manage this kind of buying in a way that vastly outstrips the "return" the average investor gets on "investment."

The key isn't to buy things just because they are on sale. Do that, and you merely accumulate clutter. The key is to buy things you'd use anyhow. For example, there's a sale on motor oil, 10% off. Buy the oil. If you use it 6 months later, you've made a 20% annual profit.

Inflation may not stay within reasonable bounds. So even if you were able to buy everything with, say, an annual profit of 20% you could still lose wealth at an alarming rate. Of course, your 20% return is much better than the 5% return someone else is making via a financial investment.

Most people will not do the math on investing. If they buy a case of oil and look at it six months later, they see a case of oil. There is no broker's statement showing they made 20% on it. So they don't understand that they made that kind of return on the investment. Plus, they are going to use the oil and then it's gone so all they see is that they spent money on oil.

If you think about it, this example is actually a leveraged investment. It's money you were going to spend (not have) anyhow, and so you make 20% on someone else's money but do so with real goods. Pretty hard to lose in that scenario.

I think the basic problem is people want to see something on paper showing their "profits" but don't understand that paper profits aren't real profits. They are just paper profits.

Let's look even closer at this, now. You don't pay income tax on the 20% return on that oil, but you will pay income tax on that 5% paper profit. Not only that, the IRS can seize your accounts (paper profit storage) with no warning or justification, but they aren't going to come to your house for that case of oil.

Does the word "duh" start coming to mind?

Investing isn't something you spend your money on. Investing is a strategy for how you spend your money. And your time.

2012-01-01 issue:

People talk about how the USA federal government "borrows" money. That's a misuse of terminology. The reality is the federal govt taxes us in an amount equal to the amount it spends. When it "borrows" from the Federal Reserve, the FR simply creates the money out of thin air. This inflates the money supply by the amount allegedly "borrowed." Because inflation means each existing dollar is worth that much less, the effect is a "taking" from existing dollar holders. In other words, it's a tax.

But the FR doesn't simply create this counterfeit money that causes us financial loss. It then records its theft as OUR debt on ITS books! Not only are we taxed (by inflation), we are also saddled with debt--that's two entries on the same side of the ledger instead of one on each side. Talk about cooking the books!

The way the FR does this, it's like the creep who stole your stereo invoices you for the value of what he took! Only in this case, there's much, much more money involved.

This scam is fundamentally different from the way borrowing works. Borrowing puts equal amounts on opposite sides of the ledger, not two entries on the debit side.

Rather than call it borrowing, we should call it debt-added taxation. Make a point of correcting the sycophants who refer to this robbery as "borrowing," because it's nothing of the sort and not nearly as benign.

Stimulating in the Economy

Now that we are clear on federal "borrowing," we can understand why even more federal debt-added taxation doesn't "stimulate" the economy. It does stimulate unemployment, as the data clearly show and as common horse sense would predict. Other things it stimulates in the economy include foreclosures, plant closings, store closings, unpaid loans, bankruptcies, cutbacks in city services, and cutbacks in county services.

People who rejoice in the fact that the USA ranks at the bottom of all industrialized nations in literacy will be pleased to know that Obamanomics also stimulates the closing of public libraries, due to the shrinking county tax base resulting from the other things this insanity stimulates.

So be careful when you encounter the propaganda about money "helping" the economy via federal "stimulus." This is not merely a false idea. It's outright fraud.

The money isn't the result of a transaction, for example I spend money (that I earned) on something I want. What enters the economy is not new wealth (none is created in this scam) or even wealth taken from another party or loaned by another party. As we just noted, it's debt-added taxation.

Just to make sure this point hits home: when the Federal Reserve creates this money out of thin air for the govt to "borrow" (instantly debasing the currency), that does not "inject" money into the economy. It taxes us by degrading the value of money already in the economy, and amazingly the FR adds debt by invoicing us for the amount we are taxed!

Accounting for Stimulus

To believe in the hocus pocus of "stimulus," you would have to do Enron style accounting. This kind of fraud is illegal, which is why Ken Lay, et al, went to prison. Also, we flunk second graders (used to flunk them, anyhow) for not being able to differentiate between adding and subtracting. It's an elementary concept. It is impossible to increase by decreasing.

So when the federal govt spends (transfers to wealthy individuals via govt contracts) money it does not have, this can never stimulate the economy. It can, and does, stimulate job loss and a whole string of other negative consequences. Thanks to Obama, we have the empirical data to prove this and no longer have to rely on difficult concepts such as 4 - 2 = 2 not 6.

Stop the Stealing

The effect all this stealing has on your financial security is anything but positive. Please let your misrepresentative in CONgress know that the rampant spending, inflating, stealing, debt creation, and "Ken Lay accounting" must stop.

About 90% of all federal govt expenditures are illegal (see the 10th Amendment), so reducing the spending to something approaching sensible does not involve any hard choices. Unless, of course, you're on the take and are accepting illegal payments to induce you to spend money your fellow Americans do not have.

It's no coincidence that most members of CONgress don't take long to become millionaires once they are in office. If we are silent, they will continue to pillage and steal. So speak up. Your financial future depends on it.