Credit Repair After Bankruptcy

Bankruptcy is sometimes the only option out of a bad financial situation. However, there are some that think of it as an easy way out. All you have to do is file some paperwork and all of your problems are gone. While it may seem like a quick fix at the time, the results can last for years. Bankruptcy stays on your record for 10 years, and destroys your credit. It is definitely not something you should take lightly.

But perhaps a bigger mistake is to give up hope after you file. Don’t think that just because you filed bankruptcy, you’ll never be able to repair your credit. Sure it will take a good amount of patience and self control, but it can be done. If you learn from your past mistakes, make good financial decisions, and follow a few guidelines, your credit will slowly start to inch its way back to a good standing. So where do you need to start?

Well, the most important thing you can do is to keep all of your existing accounts. It can be hard to open new accounts after bankruptcy. So any accounts that weren’t involved in the bankruptcy should be kept open if possible. You should treat these accounts with the best care, making sure they are always paid on time. You may need to make a budget or cut back expenses to make sure you have the money to pay these accounts.

Another way you can start to rebuild your credit is to apply for a secured credit card. This will help your credit without the risk of charging up a huge balance. Whenever your credit is better you can apply for an unsecured credit card. Just make sure you use it carefully. Try to keep the balance under half of your available credit. And never charge more than you can afford to pay.

After a while you can start to apply for loans. Start out with smaller loans. If you can’t qualify for one, ask a friend or relative with good credit to cosign for you. You don’t have to spend the money you get. It would actually be better if you don’t. This way you know all of the payments will be made on time, especially if you have a cosigner. The last thing you want to do is hurt someone else’s credit. Eventually you want to be able to qualify for loans on your own. Once your credit increases so can the size of your loans.

Obviously the best loans for building credit are auto and home loans. These loans are also the ones you have to be most careful with, especially after bankruptcy. With either of these loans you need to be practical. You probably don’t need the newest most expensive vehicle. The same goes for a home. Be realistic about what you need and what you can afford.

While it is important to open new accounts, you shouldn’t go crazy. Don’t apply for anything and everything. You’ll end up making your credit worse. You need to have a balance between revolving accounts like credit cards and installment accounts like loans. Most importantly, treat all of your accounts with great care, making sure your balances stay low and you pay on time. Over the course of time your credit will get better.