5 Amazingly Easy Ways to Rebuild Your Credit after Bankruptcy
If you've recently declared bankruptcy, you're probably wondering how to rebuild your credit. Yes, just because you've declared bankruptcy does not mean your credit life is over. There is life after bankruptcy, and it can be better than the life that brought you to bankruptcy. You just need to focus and start over with your credit history, which is easier than you think with these five amazingly simple ways to rebuild your credit after bankruptcy.
What happens after you declare Bankruptcy?
When you declare bankruptcy, it's most likely your stress levels will become sky-high. I mean, you will like to go through financial turmoil and may even have to handle a slew of other legal complications. However, your credit score is a major part of your financial life. It can impact getting loans and mortgages, along with other routine things like your ability to rent an apartment or get utilities set up in your name in the future. That's why it's important to know what happens to your credit once you've officially gone through bankruptcy — and more importantly, how you can rebuild your credit after bankruptcy.
Exactly how long does it take to rebuild your credit after bankruptcy? Will your life be better after filing Chapter 7 or 13 and having a trustee handle all of the details? When you file, can you drive a car right away? Can you file again if this doesn't fix your credit score? These and more are some of the questions that you may be thinking about — but only time will tell.
The truth is Bankruptcy affects the population differently, although the popular opinion is that your credit history will be ruined due to the bankruptcy on your record. And it may be true for some people. The good news is that even though bankruptcy stays on your credit report for seven to 10 years, the damage it does to your credit score doesn't last nearly that long. With the right approach during and after the filing procedure, there's no reason why you shouldn't be able to rebuild your credit.
How to Rebuild your Credit after Bankruptcy?
Fear of credit is the single most common mistake people make after filing for bankruptcy. With a new beginning, you have the opportunity to do things correctly this time. And doing things correctly means regaining good credit.
There are a few key steps you can take to rebuild your credit after bankruptcy. Here's what you should do:
Review the Mistakes that led you to Bankruptcy:
What you don't understand can't be fixed. Examine what caused your financial problems so you can avoid making the same mistakes in the future. You'll be able to rebuild your credit faster because you won't have to deal with the same mistakes over and over.
If your bankruptcy was due to bad luck or an emergency, perhaps you lost your job or got divorced and couldn't pay off all of your debt. consider yourself fortunate — you probably won't have to change your entire lifestyle to get back on track. However, if you racked up debt on frivolous spending, ignore bills, or didn't have an emergency fund, you'll need to make some changes.
Whatever the reason for your financial difficulties, learn from them and commit not to make the same mistakes again.
Monitor your credit reports for errors:
Another thing to do after filing for bankruptcy is to go over your credit reports. The reason for this is that mistakes do occur and information is incorrectly entered into reports at times. You should review all of your credit reports for errors at least once a year. AnnualCreditReport.com offers a free annual copy of each of your reports. Examine your report for any inaccurate data or errors, such as incorrect account status, late payments, or misreported balances. If you discover any of these issues, notify the reporting bureau immediately because they may harm your score.
It is critical to be especially vigilant in checking your credit reports regularly because creditors may attempt to take advantage of the situation by opening new accounts or leaving inaccurate information on old accounts.
Get a secured card:
Secured cards are intended for people with bad or no credit history, and they are frequently used to help people rebuild their credit. They function in the same way as any other credit card: You charge against available funds and pay them off each month until you've demonstrated responsible credit use over months or years.
As long as you pay on time and manage the account responsibly, your payments will be reported to the major consumer reporting agencies, which will help rebuild your credit score over time.
Also, when selecting a secured card, ensure that it is issued by a major bank or card issuer (Visa or MasterCard) so that it can be used anywhere a regular card is accepted. Look for cards that report your payments to all three major credit bureaus as well. The best-secured cards, like regular cards, may offer rewards such as cashback or frequent flyer miles.
Do not take High-Interest Loan Offers:
Many companies offer loans and credit cards with high-interest rates for people with bad credit. Try to avoid these offers — if you already have bad credit, these offers will not help improve it any faster and could cause further damage if you're unable to pay off the debt in time.
Because of your bankruptcy history, these lenders may claim that they are doing you a favor by giving you a loan. Don't fall for that ruse. Because you won't be able to file for bankruptcy for several years, you're an appealing risk to many lenders. That's why they're coming to you with offers.
However, don't be afraid to take out a small loan. If you need to take out a loan immediately following your bankruptcy, try to keep the amount small. As long as you're able to pay off this debt and maintain good payment history, this will help build up your credit score again and show lenders that you're responsible with money.
Make a Financial Plan:
After filing for bankruptcy, the first thing you should do is create a financial plan that includes steps to rebuild your credit. Budgeting, on-time bill payments, and debt reduction are all components of that strategy. Steps to obtain financing after the bankruptcy is discharged should also be included in the plan, such as applying for a secured credit card. A secured credit card requires you to put down a deposit equal to the card's credit limit. For example, if you want a $200 secured card, you must deposit $200 into the issuing bank's account. You will have access to your deposit as long as you pay off the balance each month when the card is due to expire. If you do not pay off at least a portion of your balance each month and fall behind on your payments, the bank will have access to your deposit to cover any unpaid balance on your account.
Conclusion
Rebuilding credit after bankruptcy can be difficult, but it's not impossible. Many people who go through the process have come out with better financial footing than before. Do you have any questions about rebuilding your credit after bankruptcy? Let us know in the comments section below!
