How to Build Credit after Bankruptcy
Applying for bankruptcy can be damaging to your credit history, but fortunately, there are ways to rebuild your credit after you have filed. While this process may take some time, reestablishing yourself as a responsible borrower is key to raising your credit score. By understanding the ways that you can raise your credit score, you can get back on the path to financial health after you file for bankruptcy.
Check Your Credit Report
If you are attempting to raise your credit score, viewing your credit report is an important step. Once you receive a copy, you should be sure that there are no inconsistencies or errors. If you do find errors, contact the three major credit reporting agencies (TransUnion, Equifax, and Experian) to have it corrected. Sometimes bad credit can result from identity theft and if that’s the case, clearing your record should be of utmost importance. Some people do not even realize that they have been victimized until they check their credit reports or bill collectors come calling.
As you may already know having bad credit can be devastating. Checking your credit report is useful in more ways then one. You can use it as you are rebuilding your credit to see how well you are doing and use it to improve. By viewing your credit report you can also see if new accounts were opened without your consent, or see if existing accounts have been compromised. Either way, bad credit of your own making or as a criminal act of another, when these things are rectified, your credit score may increase.
Pay Your Bills
Paying your bills on time is essential to rebuild your credit after filing for bankruptcy, as your payment history will make up about one-third of your overall credit score. To help ensure that you are making all of your payments on time, set your calendar to contain reminders to pay your bills before they are due. Many creditors and banks also offer services that can help you to pay your bills on time by setting up automatic, electronic payments.
Apply for Credit
If you are looking for how to build credit, applying for a credit card can be a good start. A secured card may be the only option for you at first, and you will be required to put down a security deposit with the credit card issuer. After you receive your card, pay off your bill each month and avoid carrying over balances, as this interest can add up very quickly. Also, remember that you are trying to prove you will be responsible in the future so a build up may signify otherwise in the eyes of a lender. A credit utilization ratio is a good percentage of a credit score so it would be wise to keep this in mind.
Beware of Scams
It is important to beware of organizations that promise to fix your credit score after you have filed bankruptcy or businesses that offer you deals for a credit card after bankruptcy that sounds too good to be true. Building your credit score back up after filing for bankruptcy is hard work, but it is something that you can do on your own over time at no cost. There is no overnight repair solution, so avoid any businesses or organizations that claim to be able to do so.
Maintain Your Current Loans
In some states, a person who is filing for bankruptcy is able to keep their car and mortgage loans, and these loans are beneficial for rebuilding your credit. Ensure that you are making payments each month and that you are paying at least the minimum required amount. Most importantly, remember to give the process time, as this will allow you to establish a solid payment history with your credit report.
Apply for a Loan
After your credit score has seen some improvement, consider applying for a loan. You may be eligible for an FHA loan two years after bankruptcy as long as you meet all other qualification rules. Save for your down payment during this time so that you can apply for a smaller loan, and once you have been approved, ensure that you make your monthly installment payments on time to establish a history as a responsible borrower.
Repairing your credit history after bankruptcy is challenging but not impossible. It is important to take the time after you file to reestablish yourself as a responsible borrower. By following a few simple steps and giving the process some time, you can be on your way to having an improved credit score.