How to Help Clients With Bankruptcy Credit Repair

Simplified Guide to Navigating Bankruptcy Credit Repair

Understanding the Context

In 2007, the U.S. faced an economic downturn, leading to millions of homes in foreclosure, high unemployment, and numerous bankruptcies. People found themselves overwhelmed with debt, and while bankruptcy can clear financial history, it significantly damages credit scores.

Challenge: How to help clients restore their credit after bankruptcy.

Solution: Develop expertise in bankruptcy credit repair to ensure satisfied clients and referrals.

Steps to Bankruptcy Credit Repair

1. Get Into a Future State of Mind

• Goal: Help clients focus on their financial future instead of past difficulties.
• Actions:
  • Set and remind clients of their financial goals.
  • Highlight the client’s proactive steps, like seeking credit repair help.
  • Share success stories of other clients or your own credit repair journey.

2. Know How to Help

• Impact: Recent items (within 24 months) heavily influence credit scores.
• Bankruptcy Duration:
  • Chapter 7 or 11: Stays on the report for 10 years.
  • Chapter 13: Stays on the report for 7 years.
• Tip: Focus on improving credit scores without waiting for bankruptcy to drop off the report.

3. Explain How Credit Works

• Importance: Clients often don’t understand credit scores and their impact.
• Credit Score Components (FICO®):
  • Amounts Owed: 30%
  • Payment History: 35%
  • Length of Credit History: 15%
  • New Credit: 10%
  • Credit Mix: 10%
• Action: Help clients improve in all these areas.

4. Perform a Credit Audit

• Process: Upload the client’s credit report into a credit repair software.
• Focus: Address recent negative items first.
• Outcome: Develop a targeted credit repair strategy.

5. Apply for Credit

• Advice for Bankruptcy Clients: Establishing a credit history is crucial.
• FICO® Requirement:
  • At least one account open for six months.
  • At least one account reported to the credit bureau within the last six months.
• Tips for Smart Credit Building:
  • Use secured credit only.
  • Spend only what can be paid off each month.
  • Follow good credit habits strictly.

6. Teach Good Credit Habits

• Essential Habits:
  • Keep debt below 30% of the credit limit.
  • Pay bills on time.
  • Avoid applying for new credit cards once credit is established.

Helping Clients See a Brighter Future

Credit repair is rewarding, especially helping those who have faced financial challenges. Following these steps will make you a valuable resource in your community, providing clients the tools to rebuild their credit effectively.

Learn More:

• Download: The Ultimate Guide to Starting a Credit Repair Business for comprehensive insights.

By following these guidelines, you can offer effective support to bankruptcy credit repair clients, guiding them toward a brighter financial future.