A year after declaring bankruptcy and moving with her daughter back into her par

Question

A year after declaring bankruptcy and moving with her daughter back into her parents' home, Nancy
Silbermann is about to get a degree in nursing. As she starts out in a new career, she also wants to
begin a new life. One built on a solid financial base. Nancy will be starting out as a full-time nurse at a
salary of $52,000 a year, and she plans to continue working at a second (part-time) nursing job with an
annual income of $10,500. She’II be paying back $24,000 in bankruptcy debts and wants to be able to
move into an apartment within a year and then buy a condo or house in five years.

Nancy won't have to pay rent for the time that she lives with her parents. She also will have child
care at no cost, which will continue after she and her daughter are able to move out on their own.
While the Jiving arrangement with her parents is great financially, the accommodations are "tight," and
Nancy's work hours interfere with her parents' routines. Everyone agrees that one more year of this
is about all the family can take. However, before Nancy is able to make a move-even into a rented
apartment she will have to reestablish credit over and above paying off her bankruptcy debts. To rent
the kind of place she'd like, she needs to have a good credit record for a year; to buy a home she must
sustain that credit standing for at least three to five years.

1. In addition to opening checking and savings accounts what else might Nancy do to begin establishing credit with a bank?

2. Although Nancy is unlikely to be able to obtain a major bank credit card for at least a year, how
might she begin establishing credit with local merchants?

3. What's one way she might be able to obtain a bank credit card? Explain.

4. How often should Nancy monitor her credit standing with credit reporting services?

Explanation / Answer

Part 1

Apart from opening a checking and saving bank account Nancy should transact periodically on credit. Secondly she should take a loan of small amount even though if she does not need the cash and put the ideal cash in investment such as money market or small investments. This will help building a credit repo again. The money earned from the small investment can be used to offset the interest on the loan. Thirdly, she should pay her debts promptly and on time or little before the due date, this will help her to build a good credit score. Also, paying a loan for a long term helps the lender to understand how the person performs if the credit is for the longer duration.

Part 2

In order to build a good credit with the local merchant she has to build a good credit history. She should repay all the debts on time or well before the time.

Part 3

In order to get the credit card, she should take a small loan from the bank for a long duration and try to repay it before due date. This will help her building the good credit history and a good credit score. Thus seeing the credit history bank may issue her a credit card.

Part 4

She should try getting her score very often for few days in starting so that it would be helpful to her to maintain her debts and have a control on it. She would know her limits of where to spend and how much to spend.

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