4 Tips for Rebuilding Credit After a Bankruptcy
Your bankruptcy will stay on your credit report for up to ten years. While that fact may seem daunting, you can make smart choices in other areas to increase your credit score and counteract the bankruptcy listing. The bankruptcy will also have less of an impact over time as well. Use the following tips and tricks to help you rebuild your credit after filing bankruptcy.
- Create a budget that works for you.
After you make it through bankruptcy, you should have more income than your debt obligations. That can make you an attractive borrower for higher-interest lenders. However, before you jump into any credit options, you need to go back to basics. Start with creating a budget based on your current income and regular expenses. Keeping within your spending limits will be vital to maintaining control of your finances.
- Create an emergency fund.
You should also start saving so you have an emergency fund. One of the things that gets post-bankruptcy individuals in trouble is that they take on too much right away after their discharge, whether that is making purchases generally or taking on debt. Then, they don’t have any way to deal with emergency situations. Don’t let that happen to you—start saving an emergency fund right away after you get through bankruptcy. This will help you avoid falling behind on regular payments, which is extremely damaging to your credit.
- Consider a secured credit card.
Your credit score may take a hard hit after bankruptcy. You may not be able to get credit unless it comes with a very high-interest rate. You may not even be able to qualify for any type of loan at all in some situations. One option that can speed up the credit repair process is to use a secured credit card.
A secured credit card involves depositing a specific amount of money in a bank. Then, the bank will extend you credit of up to 50% of the deposit. The bank will often pay you interest on your deposit, but secured credit cards come at a price. They will usually have an annual fee, and the interest rates are high—often in the range of 15 to 23 percent. Other charges may apply as well, but if you keep up with your payments, it can get you started down the path toward better credit after bankruptcy.
- Be patient.
You likely aren’t going to be able to find good interest options for cars or homes after bankruptcy. It takes time to get these interest rates lowed. You may be able to get financing for a car the day after bankruptcy, but that doesn’t mean you should. Instead, be patient and wait until you can get better interest rates and financing options. It often takes between 18 to 24 months to get a mortgage after bankruptcy as well.
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When you start the bankruptcy process, we can explore what your post-bankruptcy financial life will look like. Contact MaxwellDunn to schedule an appointment to learn more.See all videos