Easy Tips on How to Rebuild Your Credit
Declaring bankruptcy and defaulting on bills or mortgages can have a tremendous impact on your credit score. Your credit history, credit reports and credit scores are all based on how your debt payment history. Delinquent debts will stick around for seven years from the date of their delinquency. The most impressive thing one can do for a lender is pretty simple - pay what you owe! Here are starting off points to help rebuild your credit (Note: assume a FICO credit score from 550-600 or a VantageScore credit score ranging from 601-700):
1. Begin with a passbook savings loan. - You essentially borrow your own money at a very low interest rate. Your repayments will appear as an installment loan on your credit report. However, you should always check with your lender to ensure that the repayments will be reported to the credit bureaus. Other installment loans that can help your credit are loans for furniture or other large items and car loans. That is, if you are in the market and can afford to purchase a new car. Try to get loans from a bank or credit union as opposed to finance company loans or payday loans.
2. Apply for a secured credit card. These are similar to passbook loans in that you must deposit the amount of your credit limit with the issuing bank. After your have made several on-time payments for a specified duration, many banks will upgrade you to an unsecured credit card.
It is important to note that if had a debt forgiven for any amount larger than $600, that forgiven amount will be reported to the IRS and will show up on a Form 1099 as income later this year. For example, if you settled a $4000 debt for $2000, you will be required to include the $2000 from the 1099 as taxable income on your next tax return.
Rebuilding your credit can be easier than you may think. By not living outside your means and taking on new debt that is sure to be paid off, you can rebuild your credit score and no longer live under a dark, looming cloud. You should contact a Bankruptcy Attorney to discuss your decision of declaring bankruptcy and what, if any, other alternatives may be available to you. A Bankruptcy Attorney can also help you draft a financial plan or budget to help get you out of debt.
Greg Gilbert
Keith Maynard
