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Bankruptcy is one of the hardest things that you will ever overcome in your financial life. Bankruptcy states all too clearly to future creditors that you are willing to turn your back on your financial responsibilities that you had pledged to pay faithfully, and leave your creditors hanging without payment. However, mistakes happen and no one has a perfect life. Therefore, many borrowers are forced to file bankruptcy to get off of a sinking ship.
Sometimes borrowers have simply over extended themselves, and other borrowers may have lost their jobs or had their income reduced in some other way. Whatever your reason for filing bankruptcy, now that your bankruptcy is discharged, things can only get better for you. Your focus is now on rebuilding your credit history.
Check Your Credit Report
Few people realize that their first step following the discharge of their bankruptcy is to check their own credit reports for accuracy. There are three major credit reporting bureaus operating in the United States - Experian, Trans Union, and Equifax.
Pull your report from each bureau to ensure that your bankruptcy has been noted on your report (instead of showing delinquencies and past due accounts). In doing so, you establish a firm foundation and empty slate to begin your rebuilding efforts. Of special note, all consumers are entitled to one free credit report from each of the three bureaus one time each year. Your FICO credit score is not free, however.
Secured Credit Cards Add Fast Points
Now that you know where you stand with the bureaus, you can begin to pursue your new borrowing reputation by taking out one or two secured credit cards. This is one of the most valuable steps you can take because these secured cards (although they require a deposit in the amount of credit you wish to establish) add points each month or quarter to your credit score.
Be sure to take out credit cards with separate issuing banks. Look for cards that report monthly. You should never run over a 1/3 balance on your cards, paying the rest of your balance off immediately when you get your monthly statement.
A good idea is to use these secured credit cards for making day-to-day purchases like gas, groceries, household supplies, and other items that you buy regularly that you normally pay for with cash. This is also a great way to track your expenses and help you stay on budget. You should also establish both a checking and a savings account with a new bank. Although you do not receive credit points for having these accounts, you will be demonstrating your ability to manage money by having them.
Getting Your First Post Bankruptcy Loan
Your first actual loan after bankruptcy will likely be a secured personal loan. This type of loan will require you to pledge collateral - such as your home or vehicle. Borrow no more than $2,000, and pay it off within one year. Never pay off early, but certainly make your payments on time. Once your first loan has been paid in full and on a regular schedule without late payments, you can qualify for better loans with better interest rates and better terms.
Using these steps, anyone can repair their own credit after bankruptcy. Keep in mind that you won't have great credit overnight, or even in the next two years. But you will be working towards rebuilding your credit, and your patience and diligence will pay off when you have raised your credit score significantly. |
