I was recently asked what to do to repair credit after filing bankruptcy. Here is the advice I gave my clients, as it may be helpful to you in improving your credit score after bankruptcy.
First, for those who are worried about bankruptcy being on your credit report for at least 7 years, please realize high debt and failure to make your monthly payments on time is already hurting your credit score. Although bankruptcy is not for everyone, for those who do file, bankruptcy is meant to give you a “fresh start” by discharging debt and high balances.
Here are 5 simple things you can do now to help rebuild your credit after bankruptcy.
Get a secured credit card.
A secured credit card works essentially the same as a debit card, you pay the bank a security deposit before using it, but all the payments made will be reported as credit. Make sure the transactions are reported to the three major credit bureau agencies.
Try to get the card at a bank you would want to continue using, as you can eventually inquire about an unsecured card. After several months of managing the secured card, you should inquire about switching to an unsecured card. Stay away from cards with high “start-up” fees so that you do not go back into debt again.
Build a budget.
As obvious as it may sound, it is important to make a conscious effort to stay within your budget so you can make your monthly payments on time. Make notes of your essential expenses so you can get an idea of where you are financially. Make cuts where you can. For instance, you can downgrade your cell phone plan, eat out less often, or try to find alternate, less expensive means of transportation etc.
Get a gas or retail credit card.
These cards give you the opportunity to report good credit at places where you would normally be spending money. Once again, make sure the transactions are reported to the three major credit bureaus. Make sure you are responsible with your retail card and only spend what you can pay off each month.
Pay off your balance every month…. ON TIME.
By paying your balance on time at the end of each month, you are proving to the bureaus that you are a responsible spender and in control of your finances. Try to keep your balances low and manageable so you can pay them off in full, on time, by the end of the month. Avoid charging up to the limit. DO NOT pay the minimum monthly payment.
Check your credit report from the three major bureaus.
It may seem like the last thing you want to do. However, this is an important step. Each of the nationwide credit reporting companies [Equifax, Experian, and TransUnion] is required to provide you with a free copy of your credit report once every 12 months. But, you need to ask for it. To order, click on www.annualcreditreport.com or call 1-877-322-8228[1].
It is important to see where you stand. And, you need know what to do to get to your goal. Notify the credit-reporting agency of any inaccurate or incomplete information. It is their responsibility to correct any mistakes, which may lead to an improved credit score.
Finally, the road to rebuilding your credit after bankruptcy takes some discipline. Although the list is not exhaustive, following these simple steps will help you on that road. Remember, after discharging debt and high balances through bankruptcy, improved credit is a real possibility.
[1] https://www.consumer.ftc.gov/articles/pdf-0032-building-a-better-credit-report.pdf