Peter Daigle From Daigle Law Office Speaks With Katherine About Bankruptcy & The 8 Step Plan For Rebuilding Your Credit, On “It Needs To Be Said”

Katherine: Hello, everyone. Thank you so much for joining us today on This Needs To Be Said. We are going to shake this elephant again, talking about bankruptcy and making bankruptcy a word that shows you that you are resetting your life, not a bad word. So our elephant in the room for some time now has been bankruptcy is a bad word, talking to attorneys is scary, and we’re removing that. Talking to attorneys is not scary, and talking about bankruptcy, going through bankruptcy, having to need bankruptcy is not bad. So that is our elephant, but we’re going to keep talking with you about it with the expert.
Katherine: Don’t listen to me, I’m just hosting, facilitating the conversation, but our experts come in and share with us what it is that we could be overlooking. It could be something that is a benefit to you, and because you made it a bad word, maybe the way you were raised, maybe the way you govern your life, those things said that this is a bad word. Well, you don’t know until you open your mind up to hear a little bit about it. Joining us is our friend, attorney Peter Daigle. He’s been on many times before. If you have not been listening to our show, you just joined in, you can always go back to our archives and listen. Peter is there.
Katherine: But today, take your pen and paper out, because as we talk with him, we’re going to talk about his eight-step plan for rebuilding your credit. Now, you say, “Katherine, you told me you were going to talk about bankruptcy.” Well, we are, but even if you need to rebuild your credit, I believe there’s something that you can learn from this. So Peter, welcome back to This Needs To Be Said. How are you?
Peter Daigle: Excellent. Thank you so much. What a wonderful introduction. It’s always a pleasure to talk to you.
Katherine: Oh, I look forward to it. I have my pen and paper out. Every time I speak with you, there’s something new that I know that I’m going to take away from it.
Peter Daigle: Fantastic.
Katherine: You have this eight-step plan for rebuilding your credit after bankruptcy. That’s where I stopped, audience. I stopped. Tell us about your eight-step plan for rebuilding your credit after bankruptcy.
Peter Daigle: Okay. The first thing, I want to just clear up the misconception that bankruptcy destroys your credit for five years or 10 years or whatever. Let me just clear that up. First of all, most folks that do file bankruptcy don’t have sterling credit anyway, and so they’ve already been starting missing payments, possibly a repossession, maybe a foreclosure, so most times there are issues already on the report. The idea, what bankruptcy does, is it basically starts you off with almost like a credit neutral, which means like you’re 18 years old again.
Peter Daigle: Now, what I’m about to tell you, in terms of the credit scores, is all determined by a federal law. It’s a long word, Fair Debt and Credit Reporting Act, which is a mouthful. Basically, what it says is that credit reporting subsequent to a bankruptcy has to follow certain rules. Those rules are going to dictate how I’m going to show you how to rebuild your credit, because they have to follow these rules. What happens here is that once the bankruptcy discharge is ended, which is approximately three months after you file, you’ll have a score of approximately between 630 and 650, which isn’t bad. But the idea is, we want to try to get you to up over 700.
Peter Daigle: The first thing we do is we take a look at your credit report itself, and that means that we want to make sure that there are no errors on it. Creditors are supposed to discharge and take off all negative reportings in your report, but occasionally they don’t. So step number one of rebuilding your credit is we take a look at your credit report. You can go to annualcreditreport.com, and it’s a free site, and you can print out all three of your credit reports, Experian, TransUnion, and Equifax, all three of them. And we take a look at it. We just make sure that there’s no leftovers from the bankruptcy. So that’s the first step in the eight steps.
Peter Daigle: And then if there are, we would send off letters to the credit reporting agencies. You can dispute them online and say, “Hey, I filed bankruptcy, yet Bank of America is still showing that I was late on my credit card payments.” Those types of things need to come off. So in fact, you’re going to have a clean credit report to start.
Peter Daigle: The second thing that you’re going to want to do, and this is all part of debtor education with the bankruptcy, but you’ve really got to create a budget and stick to it, because what I’m about to tell you just isn’t going to work if you have the habit of living off of credit. You’ve really got to create a budget and stick to it, because the use of the cards that I’m going to explain next, you’ve got to be really disciplined with it. Even though you’re going to have credit now available, you’ve got to look at your budget and say, “Okay, I can only budget this much for food, clothing, transportation, going out to dinner.” So step number two of rebuilding your credit is instilling some discipline in your life with creating a budget and sticking to it.
Peter Daigle: The third step is that as we go along here and you’re rebuilding your credit, you’ve got to pay your bills on time. You’ve got to establish a system for every time the bill comes in, put it in a pile. And whether or not you pay your bills once a month or every other week or however you do it, you’ve really got to have a system here which includes paying your bills on time, because the bankruptcy is going to give you the fresh start, but once the slate’s been cleared, if you don’t be diligent about making payments on time, what I’m about to tell you just isn’t going to work. So step number three is pay your bills on time.
Peter Daigle: Now, you may have had a car payment or a mortgage payment that survived the bankruptcy, meaning that you still owe it, the car, you still owe it for a bankruptcy. To the extent that you can reaffirm debt that has equity in it that you want to keep, your car or your house, that also will go a long way towards reestablishing your credit going forward, because they’ll now start reporting again that you’re paying it on time.
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Peter Daigle: The fourth step is that you’re going to apply for new credit. What’ll happen once the bankruptcy is discharged, believe it or not, that you’ll start getting applications in the mail. What you’re going to do is, you’re going to, with our help if you’d like to have us help you, we’re going to sift through whatever the best deals are going, whether it be the annual fees or the interest rates or whatever. You’re going to apply for some credit. And the reason is, in order to rebuild your credit report, you have to have credit. By doing nothing and just letting the credit report just sit stale after a bankruptcy discharge, it’s not going to rebuild your credit. You have to go back into the credit world and show that you’re a responsible borrower.
Peter Daigle: They’re going to give you a chance. They’re going to take the chance that hopefully you’ve learned something from the bankruptcy, if it was that you were out of control with your cards, you’ve got a new budget, and you’re going to pay your bills on time. They’re going to take a chance with you, but it’s going to be for a small amount of credit. It’s going to be for a $500 card, and maybe a secured card where a portion of the money is sitting in account, and then if you don’t pay it, they’ll take it from you.
Peter Daigle: So believe it or not, they’ll work with you, because they’re going to want to try to help you reestablish it. But you’re going to have to make sure that again, you’ve got the right card and you’re diligent with the use of it. So step number four is applying for new credit. Be sure that you get at least one card, and we’ll talk about multiple cards in one of the next steps, but one of the steps is reapplying for credit.
Peter Daigle: Now, if you’re having for some reason, which it shouldn’t be as a problem, possibly ask a family member to cosign for you, or if not, then add you as an authorized user on their account. Believe it or not, a lot of times the credit card companies will report you as an authorized user. That’ll help your score, if your husband or wife or mother or father has a credit card and they can add you as a authorized user. So that’s another way that you can rebuild credit. Gas cards are easy to get too, generally easier than major credit cards, so go to the gas stations and apply for a card. And they’re very low high balances, like maybe $300 or so, so you can’t get in too much trouble buying gas.
Peter Daigle: The next step is that, this is the most important thing, is you’ve got to pay the credit card bill on time when it comes in. When it comes in, you pay it. You do not run a balance. What that will show is that will show that you have a track record of paying your bills on time. So that’s step number five.
Peter Daigle: Step number six, which is equally important, and that is, you want to keep the percentage of the amount that you charge no more than about 30%, 35% of your high limit. So if you have a $500 limit credit card, you don’t really want to go more than $150 or so on the charge. Use it to buy groceries, and then don’t use it again. And then when the bill comes in, pay it off and then use it. But if you get in the habit of running the bill up to the full balance, that does not help your score. So again, the only reason why you should use them as cards is for the sole purposes of rebuilding your credit, not to start taking advantage of the fact that you have credit. Again, make that payment on time when it comes in, and keep the balance below one-third of the limit. That’s step number six.
Peter Daigle: Step number seven is you do not want to make multiple applications for credit. Every time somebody checks your credit report for an application, it docks your score. Now, the score that the credit card companies work with on their applications to see whether or not you’re creditworthy is what’s called a FICO score, F-I-C-O, and that’s the only score that really matters. When you’re looking at what your scores are online, it’s your FICO score that’s what you want to look at. And they don’t appreciate you applying for multiple cards. Just do it sparingly. Actually, the card that you have, if you show them that you’re diligent for a few months, and an application comes in for a card that gives you a higher limit without the security, and you want to try for it, go for it. But just be careful that you’re not creating too many applications out there.
Peter Daigle: And the next step, well, the last step, number eight, is you’ve got to keep watching your credit report and your score. Now, there are ways that you can keep tracking that for free, between Credit Karma. Annual Credit Report is only going to allow you to do it once a year, so you may have to pay for the cost of the report after you get started on this, but you want to make sure that the reportings are going in accurately, so that you can watch your score go up. You want to make sure they don’t report you late if you weren’t late, and you want to make sure that the credit card that you have is sending in a report.
Peter Daigle: What’ll happen is, as long as you follow these steps, meaning that you’ve got a budget going on, you don’t overextend yourself with your credit, you keep the balances to 30 or 35%, you don’t make multiple applications, and then you monitor your report, you’ll notice that your credit score will start climbing up into the 700s. And then after about a year, toward most 18 months, you should be back up in the low 700s, and you should be able to get almost any kind of credit you want, whether it be a new car or get a higher limit credit card. Hopefully, that has given you at least the basics, anyway. I’m open to any questions that you have.
Katherine: Now, you said that we can get our credit scores, or a credit report, so is it credit report and credit scores that we can get annually?
Peter Daigle: The credit report itself will not have a score on it, and you can get that from the website called annualcreditreport.com, annualcreditreport.com. You can go online, and you’re entitled to one free one a year. There are three credit reporting agencies, TransUnion, Experian, and Equifax, and you can get all three of them online. Maybe you want to only get one of them to start, and then six months later you go for the second one, if you don’t want to spend the money. I think they’re generally around 50 or $60 for each report after.
Katherine: Oh, wow. Okay.
Peter Daigle: So want to keep the cost down. But initially, it won’t cost you anything to get them. Now, Credit Karma, I believe, is a free service that you can get your score on. You can watch your score with Credit Karma, but at some point, at least once, you’re going to want to actually look at the actual credit reports themselves.
Katherine: Okay. Now, you mentioned the FICO score. Can I get that?
Peter Daigle: Yeah, you can get it on Credit Karma.
Katherine: Okay.
Peter Daigle: There’s an app for your phone. You can go on the web app called Credit Karma. I’m pretty sure it’s free. They have a bunch of ads on it to pay for the cost. But really, you just need the score.
Katherine: Okay, so the FICO score I can get on Credit Karma, that’s what you’re saying?
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Peter Daigle: Yep. Yes, yep.
Katherine: Okay. When I was listening and-
Peter Daigle: Go ahead.
Katherine: I’m sorry, you said I want to receive the report. Let me go back to that before I move ahead.
Peter Daigle: Okay. Well, that’s your benchmark. That’s the benchmark, is how do you look today? It’s not just your score. Take a look at the report, see what it says. See what people have on it. It’s free, and you can get that at annualcreditreport.com.
Katherine: Now, you’re going to give us your information to get in touch with you, but I wanted to put some nuggets on the mind of the listeners as they’re making notes like I was doing. You’re getting a clean slate, and I remember being in school, and the teacher says you start with an A, you have to keep the A. So if you’ve got a clean slate, how do you do that? And while you’re going to attorney Daigle to get help with the bankruptcy issue, your mindset shift is the part that you’re going to have to be prepared to do differently. Whatever got you into that situation can’t be how you manage yourself this clean slate go-round.
Katherine: The first hundred times you said this, it didn’t occur to me that yeah, I’m going to get a clean slate, but I have to change something. So you can repeat this same stuff over and over, but I was like, “Okay, it makes sense, and yes, it is common sense.” But when you have a clean slate, I’ve heard some people say, “Well, I won’t get anything on my credit. That way I’ll keep it good.” But you said, and I’ve heard you say before, you have to get back out in the credit game.
Katherine: But then you also said, “Hey, if you have trouble living off credit, so now you really have to know yourself. You have to know what I am able to do.” It’s not just that you did something wrong, it’s just that whatever system you were using doesn’t work for you, so you need a new system. If living off credit was the system that didn’t work for you, because you’re going to have to go back out into the credit game, to do it better. You’re going to have to learn how to do things differently. I know we went over bullet points, but Peter, give the audience what information they need to get in touch with you outside of This Needs To Be Said.
Peter Daigle: Sure. My name is Peter Daigle, and you can reach me at 508-771-7444, or you can reach me at daiglelawoffice.com, daigle, D-A-I-G-L-E lawoffice.com. But I want to just reply briefly to one thing you said, which is really important, and that’s the creating the budget and sticking to it. What happens is, is that everybody in life is subject to creep. You get your cable set up, and you get the basic package, and then they call you up and they say, “Oh geez, you want the premium package.” You say, “Oh okay, I’ll take it.” And then you get some movies, and then you go out to dinner, and before you know it, your budget has been blown. So really, this only works if you’re willing to, like sticking to a diet, sticking to a budget and living within those means.
Peter Daigle: So you’ve got to be able to change your ways, and that sometimes is tough, because with everything we see online and we want this and we want that. And Amazon Prime has driven more people to me than anything, because you go online, and you’re like, “I want, I want, I want.” And before you know it, your credit card bill’s up there. Really, the most important thing is if you’re going to make this work, you’ve got to create a budget and stick to it. Otherwise, it just won’t work.
Katherine: Yes. Yes.
Peter Daigle: I’d like to leave everyone with that thought.
Katherine: Absolutely, and I won’t add any more. Peter, you have a wonderful day, and until next time, I look forward to more great information. You have a wonderful day.
Peter Daigle: Okay, Katherine. Thanks so much. Okay, bye-bye.
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