BANKRUPTCY BASICS: HOW CAN I REBUILD MY CREDIT AFTER BANKRUPTCY?
Good credit is a basic requirement for everyone, and the first question most debtors ask after filing for or discharging a bankruptcy is how to restore their credit rating.
Although not a difficult process, it will require considerable patience and financial discipline.
One very important piece of advice is to avoid any ‘credit repair’ services. Many of these services are disreputable and will do little or nothing to help rebuilt your credit.
Remember to take it slow. Bankruptcies do not happen overnight, and neither does building good credit.
Building good credit is a process, and it takes time.
Start with the basics of good financial sense – set a budget, and stick to it. Track your income and expenses so that you will know exactly what you are spending, and on what.
This is invaluable information that will help you develop good spending habits and financial security.
Go to your local bank or other financial institution and sign up for a secured credit card. A secured credit card is a card that is secured by a deposit held in escrow by the issuing financial institution. The deposit is usually between 50-100 percent of the credit line and is held as ‘good faith’ money that guarantees the debtor will honor the debt.
The key to using this credit card is to never charge more than you can afford to pay back in a month, and generally to never use more than 30 percent or so of the credit line in any given month. Each month that you successfully use and pay off the card can have a dramatic, positive impact on your credit rating.
Once you have established yourself as a trustworthy debtor and have proven that you can handle the credit line responsibly, many institutions will return the escrow funds to you. The length of time for this to happen varies by creditor.
It is also important that you pay every single bill on time. Car payments, utility payments, mortgage payments – while it is important that everyone pay on time, it is critically important that anyone trying to rebuild their credit after bankruptcy be extra vigilant about paying all debts on time.
Follow these guidelines, and you should quickly rebuild your credit rating.
To make sure you are on course, you should check your credit report at least once a year.
Under the Fair Credit Reporting Act, you are entitled to a free copy of your credit report from the three main credit reporting agencies – TransUnion, Experian, and Equifax – every 12 months.
Review your report very carefully, and immediate dispute any information or debts on the report that do not appear to be legitimate or which should have been covered under your bankruptcy settlement.
Contact us for any questions you may have concerning bankruptcy or rebuilding your credit after bankruptcy