Everyone knows the devastating effect that bankruptcy has on the credit score… and bankruptcy remains on your credit report for 10 years. So, repairing credit after bankruptcy is really a tough job unless you know the tips on how to repair credit after bankruptcy. So, let’s have a quick look at some of the important tips that can help you with credit repair after bankruptcy.
Take lessons from the past but do not let the past bog you down
This is the first most important thing. You had your bad experiences and had to file bankruptcy but that is now past and you have got a chance to make a new beginning. The advantage that you now have is that you are now experienced and have lessons from the past. So, you know what mistakes to avoid and how to do your financial planning in a better manner. In order to make the most of this learning, you should actually jot down (on a sheet of paper) the learning in terms of do’s and don’ts for yourself. You can then refer this sheet every month to ensure that you are on the right track.
Start building a good credit history
With a bad credit score, you will find it very difficult to get credit cards or loans etc. So, you would wonder ‘How to repair credit after bankruptcy’. The best way to start repairing credit after bankruptcy is to get a secured card (see the note below). As you use this credit card and pay your dues in time, you will start building a good credit history for yourself. And over a period of time, with a long and good payment history, your credit score will also start improving.
Note: Secured credit cards are credit cards on which your credit limit is linked to the amount of money you deposit with card-issuing bank or financial institution… thus, it is more like you can spend only the money that you really have (which you have already deposited with the bank).
Another important way in which secured credit cards help is that they help bring financial discipline into your life (…and in most cases, financial indiscipline is the cause of bankruptcy in the past). Since you are effectively spending only the money that you have, you cannot easily drag yourself into debts.
Pay all your bills in time
All your bills (including taxes etc.) should be paid in time and in full. This is something that will ensure that your credit score keeps increasing as you make timely payments. Missing your payments can cause serious harm to your credit score. So, you should really spend money only on stuff that you really need and avoid any expenses that are unnecessary (all the new dresses, electronic gadgets, expensive trips etc. come in this category).
Get an installment loan too
If you have been using your secured credit card and have been paying all your bills in time, you might be able to get a small installment loan too (e.g. a personal loan, auto loan). A good mix of various loan types can help boost your credit score. However, you should get only a very small loan. Your primary purpose should be to get this loan for the purpose of credit repair after bankruptcy… this loan should not be meant for really borrowing money.
Keep checking your credit report
Ensure that you get your free credit report once a year from one of the three credit bureaus (Equifax, Experian, and TransUnion). Review this report to check that it has all the correct data (e.g. accounts) that belongs to you. Contest the discrepancies to ensure that your credit score is not destroyed due to no fault of yours. Also, you must ensure that the bankruptcy doesn’t remain on credit report beyond 10 years.