Life after bankruptcy: How to rebuild your credit score
You filed for bankruptcy and were given a clean slate. Your credit must have already been ruined by the time you were applying for bankruptcy. Now your biggest worry is rebuilding your credit score after it took a massive hit. Your credit reports will contain information on your bankruptcy for 10 years. It will be hard getting your credit back on the right track at first but things will get better with time.
Rebuilding your credit will not be an easy task but if you read this article, you will know how you can get started.
-
Plan your finances
Before you finished your bankruptcy, you went through pre-discharge credit counseling. There, you were given information on budgeting. You need to plan your finances and one way is through creating a budget and sticking to it. You can also try saving as little as you can and put it in an emergency fund. This will help you when unexpected events occur by cushioning you and preventing you from borrowing unnecessary loans.
-
Ensure your credit reports have no errors
You will be surprised at the number of errors reported by consumers. You need to ensure your credit report is accurate by checking it regularly. A simple error can affect your credit score. Bankruptcy will be on your record for 10 years from the date you filed for bankruptcy. You need to ensure the discharged accounts are listed and the balance is $0. Also, ensure the filing date is correct. You do not want your account to reflect your bankruptcy for an extended period.
-
Get a retail card or secured credit card
You might think that your purchasing power is destroyed but this is not the case. Even when you have been declared bankrupt, you still qualify for some cards that can give your credit score a boost.
Secured cards
Secured credit cards need you to make a deposit beforehand that will protect the lender in case you are unable to make payments. In most cases, the credit limit is the same amount as the deposit. Before you run to get the secured card, read the fine print as there are some that will not approve your application until you resolve your bankruptcy.
Retail cards
Retail cards do not have so many regulations. However, they have high-interest rates and hefty penalty fees.
When taking credit cards, the same rules apply to everyone. Do not take more than you need, keep low balances, and make timely payments.
-
Consider getting credit-builder loans
You want to rebuild your credit. Why take another loan when that’s what got you here in the first place? This is not any type of loan. Credit-builder loans operate differently than you are used to. You do not get the money immediately. Instead, the money is put in a savings account until you finish making all the payments when it is released to you. The goal is to boost your credit when you make payments on time.
Like the secured and retail credit cards, read the fine print before you commit yourself.
-
Pay your non-bankruptcy loans
Even though most of your debts were discharged in your bankruptcy, there are some that you have to pay like student loans. Any active accounts will continue affecting your credit score. You need to continue paying your existing loans including those that are not on your credit report yet. If you fall behind on your payments, they could be reported and this will negatively affect your credit report.
-
Ask if your payments can be reported to consumer credit bureaus
If you are making your rent payments on time, having them reported can boost your credit score. You can ask your landlord to report it to the major consumer bureaus. You can also ask service providers to do the same when you make utility payments on time. This will encourage you to make your payments on time.
Building your credit will take time and you need to be patient. By taking one payment at a time, you can slowly get your finances back in order. It may be a few years before your credit score is back on track, but these tips are a good place to start that journey.
