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Bankruptcy can really take a toll on your financial outlook because it leaves an unmovable mark upon your credit file for up to ten years. Building your credit post-bankruptcy discharge can be a tricky and daunting task, but it can be done. There are steps that must be followed in order to show improvement in your credit score, and expecting overnight results will lead to disappointment. By filing bankruptcy, you have demonstrated to potential lenders that you are willing to turn your back on your financial obligations. Getting over the stigma associated with bankruptcy takes some time, patience, and planning.
Small Steps To Good Credit After Bankruptcy
Once your bankruptcy has ended and been officially discharged in bankruptcy court, it is time to pull your own credit report and find out if the bankruptcy and related accounts have been properly entered into your record. Because there are three different credit bureaus that handle credit reports in the United States, you will need to check all three. Each of them may hold a different record of your credit - so check with Experian, Equifax, and Trans Union. All of the accounts that you had presented to the bankruptcy court that were discharged should be noted as such. If you find that the items on your credit file are not reported accurately, contact the credit bureau as soon as possible to have the matter corrected.
The first accounts that you should attempt to open post bankruptcy are a checking account and a savings account. Preferably, you should open these accounts with a bank that you did not use prior to the bankruptcy discharge. Although these types of accounts do not report to the credit bureaus (unless you bounce a check), they are still important because they can help you demonstrate to potential lenders in the future that you are capable of managing money, which means that they will more strongly believe that you will manage your money in regards to paying your future loans. Also, having a savings account can help you to begin saving towards the down payment that you will need in the future for a car or even a home purchase.
You must also establish at least one (but preferably two) secured credit card accounts. A secured credit card account is extended to borrowers who place a deposit on file with the bank or lender offering the secured credit card. Your available credit line would be equal to the deposit that you make. For the purpose of rebuilding your credit, you should aim for a deposit of around $1,000 with your new secured card issuer. Pay on your secured credit card accounts just as you would if you did not have a deposit on file with the issuer; this means paying on or before the due date each and every month. Never be late with a payment and never exceed 30% of the available credit as a running balance. This will add fast points to your score.
Getting Your Post Bankruptcy Loan
Once you have followed the above steps, you can proceed to apply for a loan. A great first loan after bankruptcy is a car loan because it is secured with collateral of the actual car being financed. Once you have established a payment history of your secured credit card accounts and another loan (like this car loan), you will be eligible for other, bigger lines of credit soon. |
