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Bankruptcy Beyond The Basics, Bankruptcy Odds and Ends, Consumer Finance

Credit cards after bankruptcy: Don’t fear the system, use it to your benefit

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You might have heard it before, “What happened before your bankruptcy doesn’t matter, it’s all about what you do afterwards.” This is true with credit cards and your credit scores. Many people are reluctant to get a credit card after a bankruptcy because they are afraid they will fall back in the same trap that put them in a Chapter 7 or 13 in the first place. Qualifying for a credit card might be easier than you thought, and a secured card might be your best friend in rebuilding your credit rating.

Your credit score is an asset and you can and should use it to help you get ahead and build for the future.

Think of your credit rating as an asset you can use to leverage your ability to pay the credit cards back when you are carrying less debt on your shoulders. The ability to earn credit and pay it back is not the same after a bankruptcy discharge. If you owe less money to people, lenders might be more likely to extend that credit you might need to get ahead or keep up if something comes up.

Credit histories and scores are important when you apply to rent a home or apartment, when you look for a new job, and when you want to borrow money from your bank or credit union to buy a new car or something you need around the house, garage or lake. If you can reasonably afford a monthly payment, you should be able to borrow money and make the monthly payments, on time, to help rebuild and boost your credit score.

When should you apply for a credit card or a loan, to make purchases and rebuild credit?

As soon as you are able to obtain a line of credit, secured or unsecured, it makes sense to take these steps to rebuild and earn a better credit score than you thought you could achieve. The key is to spend your credit as if it is cash in your checking or savings account. Some people keep their credit card receipts and toss them in a box, paper-clipped to cash to cover the receipt. Then, when it is time to pay the bill, turn the cash into a proper payment method and pay that credit card in full every month.

If you can otherwise manage your money and not get behind in payments, go forth and charge away. There might be an emergency where you can only pay the minimum from time to time, but recall the spending and payment patterns that caused problems in the first place. If your bankruptcy was a result of a medical emergency or unforeseen event, please do not be offended by these tips, but appreciate that many people fall behind financially through their own doing or with no fault whatsoever. Again, what matters after a bankruptcy is more important than what lead to the filing in the first place.

Go get a secured credit card; you might be able to get one very soon after your bankruptcy discharge.

Many ask, “Who would ever give me credit after a bankruptcy?” The lending decision on extending credit is based on the likelihood that the debt will be repaid or secured in the event the borrower defaults. A secured credit card is one that looks and works just like any conventional credit card, with one exception, you pay a deposit, held by the issuing bank or credit union. If you don’t pay the bill on your secured card, the bank collects your deposit and they are not out the money. It makes sense for them and it makes sense for you.

Credit unions operate using a different set of rules for lending, and they can offer more options to someone in the process of rebuilding their credit. Start by setting up a checking or savings account with a credit union nearby your home or place of employment. If you get to know the people at the credit union when you stop by to make deposits and withdrawals, they can get a better sense of who you are as a person, not just a number on a credit report. Of course there are rules the credit unions follow, and it may be a while, but eventually they might be the best place to go when looking for a (secured or unsecured) credit card, home, boat or auto loan.

Joseph Wrobel, Ltd., wants to help clients get back on their feet and achieve financial success.

Encouraging clients to go forth and be financially successful after a bankruptcy should be the goal of an ethically managed bankruptcy law firm. At Joseph Wrobel, Ltd., we want you to succeed and send us referrals, and hopefully you won’t need to file another bankruptcy of your own in the future. We work to share information and encouragement to those who ended up in a financial bind and really do wish all our clients the best in future financial success.

Joseph Wrobel, Ltd. helps people get control of their finances and a fresh start at financial freedom. The firm’s website contains informative videos about financial issues as well as bankruptcy protection for families who want a fresh start. To keep in touch and read about consumer finance news and stories you can Like the firm’s Facebook page and Follow Joseph Wrobel. Ltd. on Twitter. If you need immediate legal assistance, please call Joseph Wrobel, Ltd. by calling (312) 781-0996 to talk to an attorney today.

Consumer Finance

Credit Unions: Offering members opportunities to easily and affordably earn positive credit scores

Many are turning to credit unions to take advantage of their credit rebuilding programs and features. Americans are working hard to rebuild their credit scores after enduring financial challenges like the great recession. Many are turning to credit unions to take advantage of their credit rebuilding programs and features. Credit unions are different from banks in several ways. While banks are largely publically owned and designed to generate profit for owners and shareholders, credit unions are not-for-profit and their purpose is to serve their member-owners, as opposed to maximizing profits. Members of credit unions all have a vote in how the credit union will operate to best serve its member’s needs. A currently compelling need is the ability to rebuild credit.

A recent Fox Business article highlights four ways credit unions help raise credit scores[i].

1.  Credit Builder Loans. Members who want to rebuild their credit over time with little cash outlay can take advantage of credit builder loans. These loan amounts can range from a few hundred to a few thousand dollars. When a credit union member applies for a credit builder loan, they agree to make payments on the loan against the full loan amount that is held by the credit union in a secured savings account the member cannot touch. As the member makes monthly loan payments, which are reported to the credit bureaus, the member’s credit score can improve.  Once the loan payments are all made on time and in full,[ii] the loan amount is transferred to the member. Credit builder loans are new types of credit repair options and are growing in popularity as more credit unions adopt the model.

2.  Free Credit Counseling. Unlike most banks, credit unions make credit counseling services available to their members without additional charge. The better educated credit union member should be able to borrow and repay more small loans to increase their credit score and purchasing power. The more successful loans the credit union has, the more it can lend to members who need new homes, vehicles and cash to cover out of budget expenses or investments. Managing member finances may not be widely advertised so it is smart to ask your local credit union relationship manager about their counseling services to help manage cash flow, pay debts and build savings.

3.  Online Tools. Enhancing credit counseling, the credit building tools and features of a credit union’s website can assist a member who doesn’t have time to visit the credit union in person, or who wants to crunch numbers at home. Online financial management and educational programs help members increase their financial health with the education and strategy tools it takes to create and work at the right financial plan that produces the best results. As members benefit from these tools, they can often see their finances improving and are encouraged to maintain better money management habits.

4.  Secured Credit Cards. When credit union members deposit a few hundred dollars into a secured savings account they cannot access, they can get a real credit card, guaranteed by the amount on deposit. If a member’s secured deposit is $300, that will be the credit limit on the card. As the bills come due and are paid, the reporting bureaus are notified and credit scores can be improved. Since there is no real risk of loss, credit unions can more liberally issue secured credit cards, despite a member’s challenged credit history.

To join a credit union, an interested customer must become a member. Unlike many other groups, credit unions allow new members to join at nominal rates. It is relatively inexpensive to become a credit union member. Some people keep their main account at a traditional bank with whom they have a relationship but also hold member accounts at the local credit union to take advantage of member benefits and opportunities to keep building credit and buying power.

Joseph Wrobel, Ltd. helps people get control of their finances and a fresh start at financial freedom. The firm’s website contains informative videos about financial issues as well as bankruptcy protection for families who want a fresh start. To keep in touch and read about consumer finance news and stories you can Like the firm’s Facebook page and Follow Joseph Wrobel. Ltd. on Twitter. If you need immediate legal assistance, please call Joseph Wrobel, Ltd. by dialing (312) 781-0996 to talk to an attorney.

[i] Fox Business: 4 Ways Credit Unions Help Raise Credit Scores. By Constance Gustke, Mar. 4, 2014.

[ii] Terms of credit union loans vary by institution and are determined by individual credit union policies.