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Rebuilding Your Credit After Bankruptcy
It is very easy to get into debt today. Excessive credit card balances, unexpected medical bills, loss of employment or a divorce can leave personal bankruptcy as the only option. Deciding to file personal bankruptcy is not an easy decision. Talk things over with a bankruptcy attorney and look over some bankruptcy resources. Once the decision is made, the heavy weight of debt is lifted off your back.
So, what happens after bankruptcy? The short answer is that you must begin to rebuild your credit. Almost as soon as you have declared bankruptcy your mailbox will begin filling up. You will receive many offers for credit cards and pre-approved loans. Beware the traps of getting mixed up in debt once again. You must learn to be financially responsible by avoiding past mistakes.
The first step is to check your credit report. Make sure all past debts have been removed. Occasionally, some small debts may be overlooked. Contact the appropriate credit agency to take care of this.
Next, open a checking and/or savings account at a large bank. Deposit as much of your paycheck as you can spare into your savings account. This is one of the first things lenders will look at to determine if you are trustworthy.
Another good idea is to get a secured credit card. A secured credit card is one where you keep a certain amount in the bank and borrow against it. Make sure it has a low interest rate and a low annual fee. Paying the advancement back in two months will reflect positively on your credit report.
You can also apply for a credit card from a store where you often spend cash. A gas station credit card would be a great place to start. Do not, however, look at a store credit card as an excuse to buy more.
If you need to make a major purchase like a house or car, look for "bankruptcy friendly" lenders. Put down as large a down payment as you can afford and finance the rest. A new car will depreciate two years after purchase. Buying used will protect you against this.
Most importantly, however, is continuing to pay all your bills on time. This includes utility bills and rent. Also, avoid payday loans. The high interest rates are a bad credit trap.
The best way to avoid future debt troubles is to live within your means. Your payments on credit cards should never be more than 20 per cent of your expendable income. In this case, expendable income means what is left after you pay for all your necessities.
Overall, if you stay on the path of financial responsibility, you will emerge from your bankruptcy with a much cleaner credit score than before you filed. You can ask your bankruptcy attorney for additional bankruptcy resources. You may find a credit counseling or debt education class helpful. Remember, there are resources available to help you to financial freedom.
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