How you can quickly rebuild your credit after bankruptcy
Many people are frightened away from seeking needed bankruptcy relief because they have heard that it will ruin their credit for at least 10 years. However, this is a fallacy. Although bankruptcy may temporarily make you ineligible for conventional mortgages and car loans, if you take some simple steps, you can rebuild your credit in as little as two years after your bankruptcy has been completed.
Mind Your Credit Score
Immediately after your bankruptcy has been completed, it is important to check the state of your credit by reviewing your credit reports from Transunion, Equifax and Experian, the major credit reporting bureaus. For each report, ensure that it accurately reflects the debts that were discharged in your bankruptcy. Any debts that were discharged but are reported as outstanding on your credit report can damage your credit score.
Your credit score is an important number in modern life. Lenders use it to determine whether you qualify for a loan or mortgage. In addition, some employers check your credit when considering your employment application. As a result, if you find any inaccuracies on your credit report, it is important to contact the credit bureau to ensure that they are corrected.
Consider A Secured Credit Card
Soon after your bankruptcy is complete, you may be flooded with offers of low-balance credit cards from credit companies that promise to help you rebuild your credit. In reality, many of these cards have high fees that can cause you to exceed your credit limit, further damaging your credit.
A better option is to apply for a secured credit card. This type of credit card requires you to put a deposit with the issuer that is equal to your credit limit. The deposit earns interest, but it can also be used by the issuer to pay the balance if you are delinquent with your payments.
When shopping for a secured credit card, make sure that the issuer reports to the three main credit reporting bureaus, or it will not improve your credit score. Once you have obtained it, use it regularly to help build a positive history of credit use. Do not charge more than you can pay off in full each month.
Be Diligent With Your Bills
In addition to responsible credit card use, it is important to ensure that your everyday bills (mortgage, rent and utilities) are paid on time. As up to 35 percent of your credit score is determined by your bill payment history, it is of the utmost importance to exhibit diligence in this aspect of your financial life. In addition to raising your credit score, timely bill payments can help you establish the responsible payment history that lenders often want to see before approving your car loan or mortgage.
If you are struggling with debt it is important to not let the fear of bankruptcy’s effect on your credit score cause you to continue to amass debt, making your financial situation (and credit score) even worse. An experienced bankruptcy attorney can answer any questions that you have about the bankruptcy process and can recommend the best debt relief option for you.
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