There are some major factors that you should avoid after filing for bankruptcy when you are attempting to rebuild a positive credit score and new financial life. Some of these factors to avoid include:
Poor Financial Planning after Bankruptcy
Many people do not think of the fact that a fresh financial start after bankruptcy will only help if future income is adequate to cover future expenses. Failure to budget after bankruptcy and making sure that your income exceeds your expenses can be one of the most dangerous mistakes people can make after bankruptcy.
Credit Repair Scams
If a credit repair company offers you a “quick fix” for rebuilding your credit, it is most likely a credit repair scam, as there is no “quick fix”. Common credit repair scams from credit repair companies include: companies that want you to pay before they have provided services, that won’t tell you your legal rights, which tell you not to contact a credit reporting company directly and who suggest debating all of the information on your credit report.
Falling into Old ‘Crisis’ Patterns
This occurs when you have fallen into using financial methods out of desperation, which make your situation worse. This can include living off of credit cards, using one source of credit to pay another, or borrowing from high-interest, high-fee sources.
High-Fee Credit Cards
Individuals who have gone through bankruptcy are often very motivated to rebuild their credit. This is when pre-approved credit offers begin arriving. They look and work just like any other credit card only they cost more, which will hurt you more in the long-run.
Refund Anticipation Loans/Refund Anticipation Checks
These are often offered by independent tax preparers and advertised as a way to get a refund faster. Realistically, these are loans from a bank, secured by your potential tax refund. These loans often disguise interest rates as fees, and as a result you will receive less money than your total refund.
Abusive Overdraft Loans
These loans are small but expensive loans from banks, for individuals with negative account balances. Most overdraft loans charge a fixed rate for each transaction. Due to the fact that many people use debit for relatively small transactions, these fixed rates add up to an interest rate of around 126-194 percent. You may end up owing much more than you thought.
Credit Card Cash Advance Loans
This occurs when credit cards offer cash advances that allow you to have cash immediately. With cash advances, you will start paying interest immediately, in which the interest is commonly calculated daily, making the amount you owe increase rapidly. Also, the majority of credit cards put your payments towards purchases first, in which your cash advance will be the last that you pay off, with the interest accumulating until you pay it off.
If you are able to avoid all of these, you are likely to have a much easier and more efficient time rebuilding your positive credit score.