Restoring Damaged Credit

Better credit will save you money over the long term

Your credit score directly affects most of your financial transactions such as purchasing a home, buying a car, applying for credit cards and potentially even applying for a job. Your credit score tells a lender how likely you are to default on a loan. The lower your credit score, the higher the rate of interest you can expect to pay based on the increased risk to your lender based on your past credit history. Therefore, the higher your score, the better your interest rate and lending terms will be. Improving your credit is one of the easiest ways to save money each month. What seems like a small difference in monthly payments can add up over time. Money saved on financing terms can be saved for more important things such as retirement, children's education, etc.

Your credit score is determined based on the following factors: payment history, outstanding debt, length of your credit history, recent inquiries on your credit report and the types of credit in use.

In order to improve your credit, here are a few simple tips.

Understand and monitor your credit and score. If it is negative, what are the impacting factors? Examples of such factors are high debt levels and derogatory reports such as late pays, collections, judgments or charge-offs.

Works to correct negative factors by reducing or eliminated debt, lowering interest rates and creating a budget that is manageable so that you are able to resume a regular payment history to all your creditors.

No credit is not necessarily good credit. Choose your credit wisely by establishing open lines of credit with reasonable terms. Only use credit cards to charge what you can afford to pay off each month.

Work toward paying down your debts. The lower your ratio of current debt to available credit limits, the better you will look to a potential lender. Pay off high interest rate debts first such as store charge cards and credit cards with an ongoing balance.

Maintain current payments on debts. Forgetting to make payments or ignoring debts can negatively affect your credit and create more issues such as late fees, higher interest rates, etc. Store charge cards usually carry the highest fees and interest. An easy way to make sure bills are paid on time is by setting up an automatic checking account deduction before they become due.

Limit your credit inquiries. You lose points if there are a number of credit inquiries over time that you initiate (i.e. credit cards, auto loans, store charge cards, etc.). Consider this next time you get an offer for 10% off your purchase if you sign up for a new charge card.

Learn from your past mistakes and take corrective measures to ensure a higher credit score in the future. The goal is to prove you as a reliable consumer who has manageable debt and pays on time.

For someone who has a large amount of debt or a poor payments history, a Chapter 7 or a Chapter 13 programs will positively help your credit in the long term. The common perception is that a bankruptcy will hurt or destroy your credit for 7 to 10 years - this is simply not true. While it can be reported for that time period, it does not impact your credit for that time full time. In fact, as you will read below, in different ways the programs we offer will improve your credit standing and offer positive changes to improve and restore your credit.

Debt Consolidation:

The Chapter 13 debt consolidation program is specifically designed to help you to improve your credit. This improvement occurs in several ways. Number one, the program focuses on paying down debt, not just servicing it. With 0% interest paid on unsecured debts and mortgage arrearages, you are making headway each month on the principal balance of your debt. Each month you are improving your debt-to-income ratio. The goal is that at the end of the 36 - 60 month time period, you will be free of unsecured debts such as credit card bills, medical bills, etc and caught up on your secured debt obligations such as a home or vehicle.

The benefit of the Chapter 13 plan is that it reorganizes your debts based on your unique circumstances - your income, debts and monthly living expenses, and long term goals. By creating a customized repayment plan, you will not have to struggle each month to determine which creditors to pay. The plan prioritizes your debts, provides optimal repayment terms and communicates the plan with your creditors so that you do not receive any further negative marks on your credit.

In addition to reducing your debts each month, you will also re-establish a positive payment record through the program. Most often we can set up an automatic deduction for plan payments to make the process easier. Getting back on track with regular payments to your creditors will bolster your credit score and help you negotiate better financing terms for future purchases. If the Chapter 13 Debt Consolidation plan is used effectively, your credit score will improve throughout the course of the program. Many of our clients who use the Chapter 13 to stop a foreclosure sale end up completing the program early by refinancing their home due to a better mortgage offer based on their improved credit Monique from Fenton, Michigan

Debt elimination:

Sometimes circumstances change and you are just not in the position to pay your debts back in full or at all. At the time of the initial free consultation the attorney will evaluate if you are able to pay back your debts, perhaps at a reduced rate or if you qualify to eliminate your unsecured debts and make a fresh start. A fresh start will wipe your credit clean and you simply need to make wise credit choices to re-build your credit. Sometimes based on the size of your debt, your income and high interest charges, there is no other way to make positive steps forward towards a better financial future. Typically within two years of filing a Chapter 7 fresh start, you will qualify for FHA or a conventional home loan and be back on track.

Both programs emphasize reducing debts and moving toward a debt-free existence. To see which program best fits your circumstances, we invite you to meet with one of our qualified attorneys for a free consultation.

If you need help pulling your credit report and evaluating it, we can assist you. We are able to pull a "Merged" credit report right at our office that will pull your information from all three of the credit reporting agencies and combine the information into one report. Ask about this service when you meet with the lawyer for the initial consultation.

We offer free in-office and phone consultations to review your personal circumstances, analyze your situation and advise you on the best course of action. Please call us toll free at 888-868-6005 or click here to schedule a consultation right now.