There is no magic wand that can wipe away the damage a bankruptcy has on credit, but with self-control, patience and responsibility, people can begin to rebuild their credit right away. There are so many things that can be done and most of them are quite simple.
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The first step to starting over is to take a step back and determine exactly what went wrong in the first place. That way steps can be taken to fix the causes and ensure that it never happens again. Sometimes cardholders don’t realize how long it takes to pay debts off while making the minimum payment. This can actually dig the hole deeper rather than pay it off. Whatever the reason, the experience has taught the “what not to do” of being responsible with credit and hopefully they are better educated.
One of the most important things to do right away is to check the credit report for information that is inaccurate or debts that aren’t even yours. It is surprising how many things could go wrong when filing bankruptcy. Always make sure that each debt filed is correct. If there is anything on the report that isn’t suppose to be there, inform the credit bureaus of the mistake.
The rebuilding process starts by obtaining a secured credit card. These cards report to the credit bureaus and will be the foundation for building credit after a bankruptcy. These credit cards are given to customers after depositing the amount of the credit line into a bank. The card will provide a revolving credit balance to start improving credit.
Now that a line of credit has been established, treat it with respect. Always pay it off on time and don’t carry a revolving balance. This will show the credit bureau that credit is being used responsibly and will eventually raise the credit score.
Once the secured credit card begins to help credit, apply for an installment loan that is affordable. Good examples are a car loan, home loan or student loan. It might be difficult to find a lender, but this will significantly improve credit once the loan has been repaid on time. Between 18 and 24 months after bankruptcy is usually the best time to try and apply for the loan.
The road to recovery is possible and with these steps, it won’t take long to start life over again. Just remember that only one or two credit cards are needed; more will complicate things. Never allow a balance of more than 30% to be on any credit cards. Always pay any payments on time and don’t get stuck paying a minimum payment. Never spend more than you can afford to pay off each month. These are some of the most important things to do that will keep you debt free and out of bankruptcy in the future.
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