Tips for Rebuilding Your Credit After Bankruptcy
One of the most pernicious and off-putting misconceptions about bankruptcy is that filing for bankruptcy will destroy your credit, irreversibly and forever. Sometimes, people even avoid filing for bankruptcy altogether, due to the fear that a scorched credit rating will haunt them for the rest of their lives. This is extremely unfortunate, because not only is bankruptcy hugely beneficial to millions of people — the myth that your credit will be permanently ruined simply isn’t true. Having said that, rebuilding your credit following a bankruptcy does take a little time and hard work — but it’s far from impossible. Here are some tips for rebuilding your credit after bankruptcy.
Keep a Detailed Budget
Keeping a detailed budget is arguably the foundation upon which all of your other credit-rebuilding efforts will be built, because a budget is to your bank account what a blueprint is to a house. When you don’t keep track of your money, you can’t know how much you’re going to spend, how much you’re going to have left over, or where it needs to be directed — and that causes problems. Committing to keep an in-depth, realistic budget of your finances will allow you to:
- pay your bills in full and on time, which is absolutely critical to rebuilding credit
- prioritize your spending, so that takeout doesn’t take precedence over electricity
- treat yourself responsibly without getting into a financial hole
Get a Secured Credit Card
While you may not initially be able to get a “normal” credit card following a bankruptcy, you can — and should — apply for something called a secured credit card. (Some banks will not issue a secured card until a given amount of time has passed following a bankruptcy, but others will grant them with little or no delay.) Use the secured credit card to keep a low balance and make minor charges that you can consistently pay off in full and on time. As with your bills, making regular secured credit card payments can help your credit to heal.
Monitor Your Credit Report
There are three major bureaus that issue credit reports: TransUnion, Equifax, and Experian. Not interested in having to shell out fees to see your credit reports? Not a problem — all three services offer an annual credit report at no charge. It’s a free and powerful tool, so take advantage of it.
Create a Savings Cushion
Life is full of surprises. No matter how strictly you adhere to your budget, you simply can’t anticipate every injury, plane ticket, or 2 AM trip to the vet. It’s important to create a savings cushion, so that when the unexpected does happen, you won’t have to sacrifice money you allotted to a bill or credit card payment and take a hit to your credit score.
If you are considering filing for bankruptcy, contact the law offices of Maselli Warren online, or call us at (800) 891-2657.