Bankruptcy is one of the worst things you can have on your credit report. However, almost anyone can get credit after filing for bankruptcy. It’s just a matter of knowing how to do it.
Two Things to keep in mind after you Filed for Bankruptcy:
- Use credit to get credit – Buying everything with cash will not help you to rebuild your credit score, but it is definitely a smart choice. However, if you want to rebuild your credit, you have to get credit and use credit to rebuild your credit score. If you make your minimum monthly payments on time and put an effort into rebuilding your credit over time, you can qualify for credit card with no annual fees and normal rates, personal loans, even mortgages, all in just a year or two.
- Bad credit is not forever – A bankruptcy can remain on your credit report 7 to 10 years but the negative effects will start from the day your bankruptcy case is closed. If you adopt credit habits that are responsible, such as paying your bills on time, decreasing the usage of credit cards, not applying for too many credit cards or personal loans at once or going over your credit limit your credit will improve dramatically.
Get a Copy of your Credit Report!
Get a copy of your credit report from any of the major credit bureaus: Equifax, Experian and Trans Union. Go over your credit report very carefully making sure that it is free of mistakes. Credit reports frequently have mistakes, such as accounts still open or overdue, when they are closed and erased as part of the bankruptcy agreement. If you find any mistakes, you need to contact the credit bureau immediately and get the corrections made. Any errors on your credit report can decrease your credit score.
How can I rebuild my Credit after Filing for Bankruptcy?
- To quickly rebuild you credit score you need two types of credit: credit where you can make installments (such as car payments) or revolving credit (such as credit cards).
- If you recently filed for bankruptcy you will not get a regular unsecured credit card or an uninsured loan. The next best thing is a secured line of credit. A secured line of credit means you will have to put up collateral or, for credit cards, you will have to make cash deposits and use that as your credit.
- For an unsecured line of credit, you will want to pay the balance off in full each month, reduce usage and not max out your card or go over the credit limit. If you do these things, you will eventually rebuild your credit score over time and you will notice a rise in your credit score.
- Auto loans can help you rebuild your credit, just be ready to pay higher rates. In the long this run will improve your credit score, as long as you make your payments on time.
- If you decide to refinance a loan, try to make a big down payment so that your monthly payment will be smaller.
- Maxing out your credit cards will hurt your credit score, so try to stay within the credit limit.