Rebuilding Your Credit After Bankruptcy

An important step in determining whether or not to file for bankruptcy is your plan to rebuild your credit after your bankruptcy has been discharged. Credit is a necessity; adequate credit is needed for anything from automobile insurance to renting or owning a home. The old adage is the better your credit is going into a bankruptcy petition; the better it is upon discharge.

In order to build credit you need to get and use that credit. You may swear off credit cards or vow to live on a cash-only basis but that is not going to help your credit score. A secured credit card is usually the first step to rebuilding credit post-bankruptcy. A secured credit card is a credit card that is issued with a savings account tied to it to secure the balance. Usually this is done on a one to one ratio; a $500 line of credit requires a $500 savings account. Not only does this allow you to rebuild your credit but you now have a savings account to ensure that you are not in debt again.

Another aspect of rebuilding your credit is to learn from your mistakes. Determine why you filed for bankruptcy and go from there. If you had to file because of medical bills of course that is out of your control but if over-spending was the cause of your filing then that is an easy fix. Check out books about budgeting from the library; make a budget and stick to it!

It is also imperative that you clean up your credit report upon the discharge of your bankruptcy. Some information may be erroneous and it is important to have them removed. Creditors may still be reporting your account late when in actuality it was a discharged debt so is no longer late. The accounts will need to be listed as “included in bankruptcy”. They will still remain on your credit report but will not be actively reporting thus allowing your credit score time to recover.

Another way to rebuild your credit is through the acquisition of an installment loan. An installment loan can be as easy as a student or automobile loan. An installment loan is a fixed-end and fixed monthly payment loan; you pay the same amount each month and it is paid off in a predetermined amount of time. In the case of an automobile loan it is also a secured loan – you have an asset to backup your financial investment.

There are more ways to help rebuild your credit and there are organizations dedicated entirely to just this. The steps above are just a few of the easier ways to do so.