Filing for bankruptcy can offer much needed relief to those whose debt has become unmanageable. Those who qualify for bankruptcy will emerge from the process with their debt either eliminated or greatly reduced. However, the credit mistakes that lead to filing for bankruptcy do damage your credit for a few years, which can make it difficult to secure new debt for buying a home, car or obtaining a credit card.
Rebuilding your credit after bankruptcy takes some effort, but it’s not impossible. By following a few simple tips, you can establish yourself financially and get on with your life after bankruptcy. Below are a few steps that you can take to start rebuilding your credit.
Be Ready for Banking
If you don’t already have them, open a checking and savings account. Do a little research to find accounts with fees, rates and features that best suit your needs. This will make it easier for you to track and manage your money and pay your bills online.
Open a Credit Card
Securing a new revolving line of credit will help you establish good credit history. It will generate some positive reports to the credit bureaus to show you have established new, healthy habits. You probably won’t be able to get an unsecured card right off, but there are a lot of options for secured credit cards for those who have recently been through a bankruptcy. Use your credit card wisely and always pay off the balance right away.
Keep a Zero Balance
Although carrying a balance on a credit card can sometimes be healthy for your credit, this is not the case after a bankruptcy. You need to prove to lenders that you’re able to handle your debt, so pay your balances off each month. Only make purchases on credit at the end of the month and don’t exceed the amount of your discretionary income. Put money aside to pay the balance so you can pay it in full when the bill comes.
Stay on Top of Credit Reports
Be sure to check your credit with all three bureaus at least once a year. (You can request your free credit report at www.annualcreditreport.com.) Make sure that all of your accounts are reporting correctly and that no new accounts have been opened without your approval. If your credit score looks lower than you expected, consult with a credit counselor about any changes you may want to make.