How to Rebuild Your Credit Score Post-Bankruptcy: Our Top Four Tips
Bankruptcy takes a major toll on your credit score. It will stay on your report for ten years after you file. Although this may seem like an insurmountable challenge, it actually becomes tolerable with a little hard work and care. As more time passes, the bankruptcy will weigh less and less heavily on your credit. As you rebuild, keep these tips in mind:
1. Make yourself a budget and stick to it.
Key points include:
– Learn from your mistakes – It’s wonderful if you can incorporate what you’ve learned from the bankruptcy process into your need budget.
– Make sure you always have more income than your debt obligations – This makes you a more attractive borrower for higher-interest lenders.
– Don’t move forward with credit options too quickly – Your budget should start with the basics— your current income and monthly expenses.
– Be strict about your spending limits
2. Set aside some backup money.
Make yourself a little emergency fund that you can fall back on if needed. It is common for those who have just gone through a bankruptcy to take on too much too fast after discharge. Don’t rush into purchases or taking on debt. Instead, think about what you need to have on hand to deal with potential emergency situations.
You never know when the unexpected will occur and you don’t want to find yourself stuck between a rock and a hard place. Having some reserve can also make it less likely for you to fall behind on any of your regular payments.
3. Consider a secured credit card.
Because of the hit that a bankruptcy takes on your credit score, it is unlikely that you’ll be able to borrow money without an exorbitantly high interest rate at first. In fact, you might not qualify for any loan at all. Using a secured credit card can speed up the repair of your credit score.
What is a secured credit card? It involves depositing a set amount of money into the bank, then having the bank extend you credit of up to half of the deposit. The bank might pay you interest on your deposit.
Keep in mind, however, that secured credit cards aren’t perfect as they come with annual fees and interest rates of 15% – 23%. Still, it’s an option for getting on the right path!
4. Remember: time will help.
Be patient! This is going to take a while. You likely will need to put off a new car or a new home for a few years because your interest rates will be so high. Don’t be tempted and wait until it’s safer and wiser. Think of it as regaining someone’s trust— no matter how much effort you put in, it’s always going to take some time. Don’t get discouraged.
Contact the Bankruptcy Attorney Team at Maxwell Dunn PLC
If you have questions about repairing your credit, or any other bankruptcy-related matters, a bankruptcy attorney at Maxwell Dunn PLC can help. We encourage you to contact us today.See all videos