How to Rebuild Your Credit After Bankruptcy
Do you dream of having good credit? Maybe you’ve found yourself in a place where your credit card debt is weighing heavily on your credit, making it impossible to get a car or home loan. Most people are terrified to file for bankruptcy because they believe it will financially ruin them. This is not true. Bankruptcy can actually help you tremendously by freeing yourself of all your unsecured debt. But how you handle your finances and debt after bankruptcy will be make or break your financial future. Here are 6 tips to help you successfully rebuild your credit after bankruptcy:
1. Keep track of your credit report
Bankruptcy will hurt your credit. Be prepared for it to drop. But after a chapter 7, all your unsecured debt that was weighing on your credit will be gone. This will allow you to rebuild your credit faster after a bankruptcy than trying to dig out of the hole of massive unsecured debt. While rebuilding your credit, it’s essential to check your credit report often to ensure that all the information on it is accurate. Before your bankruptcy, you were probably terrified to look at your credit report. Not anymore. It’s time for you to keep track of your credit. Often banks offer free credit monitoring. If this is available to you it’s a great and easy way to keep track of your credit score. As you stay faithful with the other tips in this blog, you’ll start to watch your credit climb!
2. Create a budget and stick to it
Budget. *gasp!* Don’t let this word scare you either. Being unaware of your expenses is what got you into a place where you needed to file for bankruptcy. Take a look at where you’re spending your money. Something we recommend is to take your paycheck and separate it out into different accounts. Here are some example percentages you could try: Put 50% into an account for your bills- rent/utilities/internet/groceries/car payment/insurance etc.Put 30% into an account for an account for discretionary spending Put 20% into an account for savings You can also look at anything you want to work towards- paying off a car loan, taking a trip, saving for a new piece of furniture etc. and change up the percentages as much as you like. Even if you’re not making much money or 90% of it goes to bills that’s alright. Start by managing the money you have. Be sure to remove any sneaky subscriptionsthat you’re not still using. You’ll start to find that money is pouring out of your bank and you were unaware of it. Once you start having money in savings guess what will happen? You will start to earn interest instead of paying it. (What a concept right?!) Vow right now to never pay credit card interest again. You earn interest from now on.
3. Get a secured credit card
Forget regular credit cards for awhile. One way to start rebuilding your credit is to get a secured credit card. A secured credit card requires you to deposit funds that serve as collateral. The credit limit is usually equal to the amount of the deposit. Use the card to make small purchases and pay the balance in full every month. If you want to get really crazy pay it off every week. Watch your credit climb by establishing a positive payment history.
4. Make on-time payments
Never ever make a late payment. Staying aware of all your bills is key here. One of the most significant factors that affect your credit score is your payment history. It’s crucial to make on-time payments on all your bills, including credit cards, loans, and utility bills. Late payments will negatively impact your credit score and make it harder to rebuild your credit after bankruptcy.
5. Consider a credit-builder loan
Another option for rebuilding your credit is to get a credit-builder loan. This type of loan allows you to borrow a small amount of money that is held in a savings account. You make payments on the loan, and once it is paid off, you get access to the money in the savings account. This will help you establish a positive payment history and improve your credit score.
6. Be patient and persistent
Rebuilding your credit after bankruptcy takes time and effort. It may take a few years to see a significant improvement in your credit score, but it’s essential to be patient and persistent. Continue making on-time payments, keeping your balances low, and monitoring your credit report regularly.There’s hope for your financial future. We’ve had clients able to purchase a home 2 years after
bankruptcy, depending on their reestablished credit and income. If they can do it, so can you. Start by creating your budget, getting a secured credit card, and making on-time payments. Consider a credit builder loan and look at your credit report every month. With time and effort, your credit score will rise and you’ll be back on track financially. Remember- your days of paying credit card interest are over. You earn interest from now on. You can do this!If you’re ready to have a financial fresh start and want to know if bankruptcy is right for you, complete our bankruptcy questionnaire and someone from our team will be in touch with you shortly.