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What does it take to rebuild credit after bankruptcy?

Bankruptcy is a subject that is rife with misconceptions. One that is perhaps most commonly held in Arkansas is that going through either Chapter 7 or Chapter 13 bankruptcy means that the filer is forever destined to be saddled with a credit score so low that hope of ever obtaining a home loan, car loan or even a standard credit card must be abandoned.

A more realistic view of the situation might be that your credit score probably reached the lowest point it could before bankruptcy protection was sought. That being the case, it becomes possible to look at bankruptcy as the point at which the recovery of your credit actually begins.

As many with experience in the area of bankruptcy law know, it is not only possible to revive your credit after bankruptcy discharge, it very likely will happen faster than you think. Here are some reasons why, as noted by Bankrate.com's Bankruptcy Adviser.

To begin with, lenders know that individuals who file bankruptcy, statistically do it only once in their lifetimes. Additionally, they know the law limits anyone from filing for bankruptcy more than once every eight years. That means that if credit is extended, the chances of another bankruptcy filing are low and a clear time frame exists within which repayment is likely to occur without a glitch.

It is not unusual at all for bankruptcy filers to receive offers for new unsecured credit cards, the most common type, shortly after the case has been finalized. The interest rates that are expected are likely to be higher than preferred. There might also be an annual fee required. But done carefully, it is a way to get a new credit history started.

Credit unions and banks might also be good resources to turn to. Tight restrictions might need to be met to get a line of credit. But once established and maintained, the association with a branded entity means later applications to other lenders are likely to be viewed more favorably. 

Source: Fox Business, "How Do I Establish Credit After Bankruptcy Discharge?" Justin Harelik, Bankrate.com, April 22, 2014

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