Your bankruptcy attorney will advise you on the best way to handle your financial affairs after dealing with your bankruptcy. After filing for bankruptcy and starting again on a level financial footing, it is possible to use a credit card wisely and responsibly to actually improve your credit rating. Being able to obtain a credit card after bankruptcy is not an excuse to make more debt. It is a chance to prove to the banks and major lending institutions that you are a responsible financial risk.
Credit is all based upon risk and risk analysis. Any bank, when assessing an application for a credit card or loan will base their decision on the level of risk that they feel they are taking by allowing you the money. This risk is determined by means of a credit score and all banks use similar scoring systems to rate the level of risk. Your bankruptcy attorney will tell you that after bankruptcy it is important to create an acceptable risk profile as fast as possible and using a credit card is one of the ways of building up a good credit score. Beware though, of falling into the beguiling trap of overspending on a credit card.
Use these tips to help you create a good credit rating and avoid the debt trap:
- Use your credit card as little as possible. The banks take note of the usage on a credit card and will be able to use your spending patterns as an indicator of credit risk for the future.
- Paying off a credit card in full each month does not mean that you are an acceptable credit risk, especially if you are using the same amount of credit every month.
- Spending on the credit card to the maximum amount is also not a good idea if you are trying to create a good credit rating. An increased debt to income ratio will provide a negative credit score with the banks.
Using a credit card responsibly will encourage the banks to extend your more credit, which you may need in the future. Keep your monthly credit card use as low as possible and for the first few years, never max out your card. Filing for bankruptcy in Chicago does not mean that you'll never be able to get a bank loan again. With a little work and some excellent legal advice form a reputable bankruptcy lawyer you will be standing strong once more.