It is common knowledge that filing for bankruptcy will damage your credit score. What many people do not know is how to rebuild your credit after bankruptcy. A bankruptcy can stay on your credit record for seven to ten years. However, if you follow the steps I have outlined below, within about two years you can build your credit back up to a point that will get you approved for just about any loan.
Step #1 Start Using a Budget
Taking a look at your income and your expenses is really the first step to rebuilding your credit. Once you have established a budget, it is simply a matter of staying within your budget, and not over spending. This will ensure that you will have the money necessary to make all of your payments on time, and that you have enough money leftover to live.
Step #2 Open a Savings Account
Setting up a savings account is also a great idea. Even if you can only afford to set aside a few bucks a week, achieving small financial goals will set you in the right direction. If you can’t open a savings account right away, just set the money aside.
Step #3 Cut Out Impulse Buying
Cutting out “impulse buying” can help you save a lot of money. Not only will you have extra money because of it, but also breaking the habit of spending money impulsively will allow you to buy only what is necessary, and more importantly, what you can afford.
Step #4 Familiarize Yourself with Your Credit Report
Keeping an eye on your credit report is crucial after you have filed for bankruptcy. Sometimes negative marks are put on your credit report accidentally. So, it’s a good idea to review your credit report every few months to ensure all the entries are accurate.
Step #5 Get a Credit Card or a Loan
Many people think that it is impossible to obtain a credit card post-bankruptcy, but this is just a myth. You might not receive a high credit limit, and your interest rate might be high, but trust me after your debts have been discharged you will get credit card applications in the mail. Because you have just filed for bankruptcy, don’t be surprised if you need a co-signer for your loan. Once you have a loan or a credit card, it is critical that you make all of your payments on time. It is also important to keep your loans, and credit cards open for at least six months, even if you can pay them off sooner. This will allow the banks and credit card companies enough time to report to the top three credit reporting agencies.
Your Bankruptcy Attorneys
If you are overwhelmed by debt, and unable to make your payments, filing for bankruptcy could be the first step in starting to rebuild your credit. At McFarlin LLP we offer free consultations to prospective clients. Contact us today (888) 728 0044, or email us.