01 May How to Rebound After Filing Bankruptcy
You tried your best to pay off your debt, but no matter what you did, you couldn’t get out from under it. That’s when you finally made the decision – you filed for bankruptcy.
Now, you aren’t sure if that was the right decision. The bankruptcy will be on your credit report for a full 10 years, and that means lenders will view you as a risk. Is there any way out?
Actually, there is. You can rebound much faster by taking immediate steps to restore your credit.
Get Your Finances in Order
When you file for bankruptcy, you have to prove that you are a low risk. That means you have to pay all of your debts on time – every time. It is important that you get your finances in order before taking on any new debts so that you can meet all of your payment obligations.
You will learn about budgeting when filing for bankrupting. You will have to take a court-minded class, and you will learn everything you need to know about budgeting in the class. Create your budget, and then build savings and emergency funds. These funds will help you if you don’t have the money in checking to make a payment.
Dispute Errors on Your Credit Report
You also need to make sure that there isn’t any inaccurate information on your credit reports. When you pull your credit reports, you probably aren’t going to like what you see. First, of course, your bankruptcy will be on the report for a whopping 10 years. Also, the bankruptcy debts will remain on the report for seven years.
That doesn’t mean that everything on your report is accurate, however. A single inaccurate item can hurt your score, so verify all of the items on your report. If you see anything that shouldn’t be there, dispute it. Even if it only moves your score up a few digits, it will be movement in the right direction. That will help you as you rebuild your credit after bankruptcy.
Get Some Secured Credit
You want to prove to lenders that you aren’t a risk, but that will take some time. You aren’t going to be able to sign up for a low-interest, unsecured credit card right out the gate. You are going to have to pay your dues through secured credit. You can get a secured loan from your local credit union or bank. If you do this, you will essentially take out a loan that is secured by money in your account. The money that you have in your deposit account is locked until you pay off the loan, so you are just borrowing off yourself. However, the financial institution will report to the credit bureaus on your behalf.
You can also take out a secured credit card or get a cosigner. All of these options will help you rebuild your credit.
Be Smart with Your Credit
After you finally get some credit, it is very important that you use it wisely. If possible, only use 10 percent of the limit, and never go over 30 percent of the limit. Also, make all of your payments on time.
After you make on-time payments and keep your balances low for some time, you will be seen as less of a risk. Then, you will be able to get some low-limit unsecured loans. Keep those balances low and make your payments so you will be seen as even less of a risk.
Bankruptcy isn’t a financial death sentence. You can get out from under it well before the 10 years is up by being smart about your credit. Only get what you can afford and be responsible with it. Show lenders that you are a low risk so you can get the credit you need.