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How to rebuild credit after declaring bankruptcy

Florida consumers who file for bankruptcy might know that a Chapter 13 bankruptcy remains on a credit record for seven years while a Chapter 7 bankruptcy stays for 10 years. However, people can start rebuilding their credit as soon as a bankruptcy is discharged. They can also start to build spending and saving habits that may prevent them from having to file for bankruptcy again in the future.

The first step is to make a budget. Payment history accounts for 35 percent of a FICO score, so paying bills on time will be important. A budget should also allow room for savings. If there is no money left over for savings, a person should begin looking at ways to spend less or make more money. An emergency savings fund can help keep a person from spiraling into serious debt again by having to use a credit card or services such as payday loans.

People can get free reports annually from the three credit reporting agencies, and they should do so and review them carefully for any errors. They should also consider building credit by taking out a secured credit card. This allows a person to deposit money in an account and get a card with that limit. Using and paying off the card regularly can help build credit.

That a bankruptcy permanently destroys credit is one of several common myths about filing. Another is that a person declaring bankruptcy loses all assets. In a Chapter 7 bankruptcy, assets up to a certain amount are exempt, and in a Chapter 13 bankruptcy, a person creates a plan to repay creditors over three or five years and keeps those assets. Filing for bankruptcy also stops creditor harassment and other actions immediately.

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