From September 2010 to September 2011, the US courts report that there were 1,467,221 bankruptcy filings in the United States. If you’re among those who filed for bankruptcy, you’re certainly not alone, and you’re probably wondering, along with thousands of others, where to go from here.
Obviously, bankruptcy comes with a big hit to your credit, and your primary goal now is probably to repair your credit score as best you can. There are several different ways to repair your credit score after bankruptcy, and going out with a plan will help you boost your credit score faster. Here are just seven steps you can take to repair your credit after bankruptcy:
1. Check your credit reports.
A couple of months after your bankruptcy is finalized, check your credit reports from all three major credit reporting bureaus, and get a credit score from each of them. On your credit reports, you’ll want to make sure that the bankruptcy was properly filed to the credit reporting bureaus and that the debts that were discharged are marked correctly. It will help you rebuild your credit more quickly if everything on your credit reports is accurate. Also, it’s helpful to pull a credit score just to see where you stand.
2. Start with pre-paid credit cards.
The best way to build credit is to use credit, but you probably will need to start with secured credit cards. Essentially, you pay a deposit for your spending limit for these cards. If you fail to make payments, the lender can take your deposit instead of the payment. If you can use it responsibly by paying it off faithfully each month, your credit will start to improve right away.
3. Don’t miss a payment.
It’s a good idea to put all of your payments on auto-payment if possible so that you don’t miss any. It’s especially important to keep making payments on any loans you still have, such as your mortgage or your student loans. Missing even one payment can be a big setback, so be diligent about this. If you have trouble making payments because of cash flow, rather than because you don’t make enough money to cover your bills, talk to creditors about setting a different due date for your bills.
4. Keep your credit usage in check.
Of course, it’s important to keep your credit in check. If you do get a credit card or a store card, keep your balance as low as possible. Ideally, you’ll pay off your credit card each month. This will keep you from making interest payments, and it will also show the credit reporting bureaus that you know how to be responsible with credit, which will help improve your credit score.
5. Get a car loan.
Once you’ve bumped up your score a little, try to get a small auto loan. Installment loans like these can help your credit score if you make the payments on time, every time. Just be aware that you may not be able to pays as much for a car as you would have been able to before your bankruptcy filing because you won’t get a great interest rate. Just set your sights lower, and remind yourself that it will get better!
6. Apply for low interest credit cards.
As your credit score improves, Daniela Baker from CreditDonkey says, you can apply for low interest credit card. Again, make sure that you are using credit as responsibly as possible. Put yourself on a tight budget.
If you have trouble tracking your spending, use an online application like Mint.com, which can link your checking, credit card, and loan accounts so that you can keep track of all your spending each month.
7. Be patient.
Don’t fall for dishonest schemes that tell you that you can erase your bankruptcy filing from your credit report. There isn’t any way you can do this, and that bankruptcy will stay on your report for up to ten years. However, if you’re diligent about rebuilding your credit, you can have decent credit well before a decade is out, so you can still buy a car, get a credit card, or get a mortgage.
These seven steps will help you rebuild your credit after a bankruptcy. They’re simple enough, but the key is to stick to it. It takes time and patience to rebuild your credit score, but the work will definitely be worthwhile in the long run!