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Rebuilding your credit score after bankruptcy

For many Illinoisans considering whether to file for Chapter 13 bankruptcy, one of the key issues is their credit scores. Or, more specifically, bankruptcy's deleterious effect on those score. But just how serious are these concerns? Let's explore that further. 

Credit scores are created by several credit-reporting companies - Experian, Equifax and Trans Union. These companies come up with those scores by scouring public records and talking with creditors (like credit card companies). As part of that research, these companies will normally hear about bankruptcies (which can be found in public records).

Why do these companies spend so much time assembling these records and, ultimately, distilling them into a score? For money, of course. They sell their credit reports to a variety of people and companies such as banks, landlords, employers and lenders. 

How long will a bankruptcy stay on those credit reports? For Chapter 13 bankruptcies, 7 years. After that, the information normally must be deleted from a person's credit report.

In the meantime, what can a person do to rebuild his or her credit report? The same thing that everyone can do: obtain credit and then pay it back on time over and over. But that can be easier said than done. After all, it is harder to get credit right after a bankruptcy. But it is possible. For example, if a person can get a co-signer for the credit. Otherwise, a person can sign up for a secured credit card. This kind of card is secured by a bank account. In other words, the card's credit limit is capped at the amount of money in the bank account.

Source: FindLaw, "Rebuilding Credit FAQs," Accessed Dec. 6, 2016

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