How to Establish Credit After Bankruptcy

01
February

Going through a bankruptcy can be a stressful and draining process. However, sometimes filing for bankruptcy is the best option that a consumer has to help them fix their financial situation. While bankruptcy affects one’s credit, it also helps to clear the slate, so that a consumer may begin to rebuild their credit. Fortunately, there are a number of steps that can be taken to begin rebuilding credit and permanently repair a frustrating financial situation.

What to Do Right After a Bankruptcy to Help Your Credit:

The first thing that a consumer needs to do after a bankruptcy, is to check with each of the three main credit bureaus, Equifax, Trans Union, and Experian, to be sure that they are reporting the bankruptcy correctly. They should report that the correct debts are “discharged in bankruptcy.” If there is an error in one of the reports, the consumer will need to notify the credit bureau so that the error can be corrected. Failing to do this can have a negative affect on one’s credit if there happens to be errors on one or more of the credit reports.

Another important thing to do after a bankruptcy is to decide what to do with any vehicles that are not paid off. If a consumer wishes to continue to pay their auto loans and keep their vehicle(s), they will need to come to a reaffirmation agreement with their lender. This agreement assures the lender that the borrower will continue to make their car payment. However, if a borrower is planning on surrendering the vehicle, this agreement should not be signed.

Five Simple Ways to Establish Credit After Bankruptcy:

1. The first thing to do after a bankruptcy is to begin building credit. While lenders will not be willing to give you an unsecured credit card at first, apply for a secured or pre-paid credit card. Simply having a revolving debt that is kept in good standing will help to rebuild credit. Once you are eligible to obtain an unsecured card, apply to open an account. However, it is important to keep the balance on all credit cards low, as high balances will negatively affect a borrower’s credit score.

2. While establishing credit, it is important for consumers to monitor their progress. This can be done by obtaining a credit report every few months or by joining a credit monitoring service. It will be difficult to improve your credit score if you are unaware of how your efforts are affecting your score. Therefore, keeping a close eye on progress, will help to keep the process on the right track.

3. When establishing credit, it is imperative to pay every bill on time. Making each payment on time will help to show accountability and improve your credit score. Making late payments will only prove to lenders that you can not be trusted to responsibly handle credit, which will make them less likely to approve any requests for credit.

4. A great way to establish credit is to open a savings account. Many banks even offer debit cards that will allow customers to easily access the money in their account. However, it is important to get into the practice of saving money and add to the account whenever possible. Having money in savings will even help when obtaining future loans, as lenders will take a borrower’s assets into account when evaluating their ability to make necessary payments.

5. A savings account can also help to secure a line of credit. Some banks will give borrowers a line of credit, as long as they have a savings account that can be used as collateral for the loan. Obtaining a line of credit and making all payments on time can greatly help to improve one’s credit score.

While coming back from a bankruptcy may be difficult, it is not impossible. A bankruptcy will be only be evident on a credit report for up to ten years and many consumers can even obtain a mortgage loan after only two years of rebuilding credit. So while repairing one’s credit may be difficult, it can be done by taking the necessary steps to obtain new credit and by showing a renewed sense of financial responsibility.

This post was written by

jason – who has written posts on Budget Clowns.
Father of three and married to a lovely women. Always looking for ways to save money, and invest it properly for my children's future.

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