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The economy seems to be improving slowly in 2013. However, the damage that the recession beginning in 2008 did has lingering effects. According to the U.S. Bureau of Labor Statistics, 13.8 percent of people in the U.S. were unemployed or underemployed in March 2013. U.S. bankruptcy courts reported almost 1.3 million people filed for bankruptcy in 2012. Many who file bankruptcy fear that they will never be able to repair the damage that filing bankruptcy can do to credit. However, people can take several steps to rebuild their credit after filing bankruptcy.

Check credit reports

It may be difficult for people to view their credit reports immediately after emerging from bankruptcy because credit scores can sustain a great deal of damage from bankruptcy. A FICO credit score that had been in the 700s prior to filing can fall as much as 200 points after filing bankruptcy, according to financial experts. However, it is important that people review their credit reports to check for any inaccuracies that could be making their credit scores worse than they should be. People should also use that opportunity to ensure that all the debts that were discharged in bankruptcy are listed as a zero balance on their credit reports.

If people do find errors on their credit reports, they should contact the credit reporting bureau issuing the report and dispute the inaccuracy.

Pay bills on time

People can use their existing obligations to build positive payment history, which will help improve credit. Bankruptcy does not eliminate all debts and some people also choose to reaffirm home mortgage and car loans after bankruptcy. Making timely and regular payments on mortgages, auto loans, alimony, child support, student loans, telephone bills and other debts will show lenders that a person is creditworthy.

Credit reporting bureaus also include rental history in credit reports, so if a person did not choose to keep his or her home after bankruptcy, paying rent regularly can help improve credit.

Secured credit cards

Secured credit cards can also be a useful way to rebuild credit. People deposit a certain amount of money with the card issuer and the deposit amount is the credit limit in the card. Secured credit cards give lenders the security of knowing that if the borrower does not pay his or her bill, the lender can remove the balance from the deposit. Secured credit cards also benefit borrowers because the borrower cannot spend more money than he or she has, and many card issuers report payment activity to credit reporting bureaus.

People need to check with the issuer of a secured credit card to make sure that it reports secured credit payment history to credit reporting bureaus before obtaining the card. Additionally, people should watch for cards that charge large fees for getting secured cards.

Use caution

Many people who file for bankruptcy report being flooded with credit offers after emerging from bankruptcy. However, people need to use caution when applying for new lines of credit. These can be predatory lending offers with high-interest rates and annual fees. People should also steer clear of those promising to rebuild credit for others. So-called credit repair firms cannot do anything for an individual’s credit that he or she cannot do alone – and these firms charge for their “services.”

If you are considering bankruptcy but are worried about regaining credit after filing, speak with a seasoned bankruptcy attorney who can discuss your situation with you and advise you of your options.

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