There is no doubt that bankruptcy has a major effect on your credit. That said, going bankrupt does not mean that you’ll never be able to get credit again. This article explains how to rebuild your credit after bankruptcy.
Obtain A Secured Credit Card
One of the first things you should do once your case is finalized is to get a secured credit card. A secured credit card is just like any other credit card, except that your credit line is secured by a deposit you make into a special savings account that is attached to that card. Your credit limit is equal to the amount that you have on deposit in that savings account.
Typically secured cards will not have the best terms, but more often than not, no credit check is run and so long as you can deposit necessary funds, usually between $200 to $500 and pay the application fee, you’re pretty much guaranteed approval.
After a few years of judicious use, you can apply for an unsecured credit card without too many problems.
Make A Large Purchase
If you can afford to make a large purchase such as buying a car, do so, using a co-signer if necessary. Taking on a large credit line will provide an immediate boost to your credit score, and if you continue to make all of your payments on time, will go a long way to re-establishing your credit.
Pay All of Your Bills, Including Your Utility Bills On Time
Now that you’ve cleaned house and you’re not weighed down by too much debt, you shouldn’t need to bounce bills around. Some lenders will look at bill payment history such as on utility bills which typically do not show up on your credit report as an alternate means of establishing your willingness to pay.
Avoid Overdraft Fees
Having a large amount of overdrafts can signal that you’re in financial peril and like all cash advance type schemes, ends up being more expensive for you in the long run.
You can avoid those overdraft fees by balancing your checkbook against your monthly bank statement and keeping meticulous records of everything you’ve purchased, including those debit card purchases that are all too easy to forget about.
Check Your Credit Report For Errors
Just because you’ve declared bankruptcy, doesn’t mean that there aren’t any errors on your credit report. Negative items are only allowed to be reported for 7 years, and if there is the slightest discrepancy between the information on the report and the actual debt, it can and should be removed.
The main thing to remember about how to rebuild your credit after bankruptcy is that it takes time. As time passes, the older, negative information starts to count less and less. Creditors are concerned about your willingness to pay as reflected in the near past (6 months to a year) and the present and not what happened in the distant past
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