Filing for bankruptcy can leave a person and their credit confused and devastated. However, there are many ways to rebuild your credit even after bankruptcy. Here are a few tips that will help you increase your credit score and put some basic worries to bed.
The upside of filing for bankruptcy is that all your debts are removed immediately, but at a very severe cost. Bankruptcy is one of the harsher credit delinquencies and can stay on your credit report for seven to ten years, depending under which chapter you had filed. This stain can make recovering and re-establishing yourself difficult, but not impossible.
Before you had filed for bankruptcy the credit bureaus had kept track of all late payments, judgments, charge-offs, tax liens, etc. You should make sure all this negative information was included in your bankruptcy before the discharge. If they are not included, they are active accounts and will further affect your credit or limit your credit options. Credit companies do not usually make updates after a bankruptcy discharge, therefore double check beforehand.
Once the discharge closes, keep records of your papers so you can prove to any future creditor that you have a clean slate and do not owe any money. The problem is that you are now at a higher risk and your credit score has probably suffered tremendously. Initially you will be stuck paying very high interest, but you can improve your credit, obtain loans and lower your interest rates without waiting seven or ten years for the delinquency to drop off your report.
Get a credit card with a low limit, if you can. Do not over-spend and pay the entire balance every month before the due date. If making payments or over-spending was your original problem, you can get a pre-paid credit card. Like debit cards, you can deposit money onto your prepaid card but they can help build your credit better than debit cards. The catch is that they cost between five to ten dollars to open the account and there are deposit fees. However, bankruptcy leaves you with minimal options and the benefits are worth the costs.
Sometimes after a discharge, credit companies will mail offers for credit cards or loans. These offers generally have high interest rates and should be avoided. When applying for credit cards after bankruptcy, make sure you know the terms of your contract and understand how all rates and fees work.
Next, buy a calendar and put it in your office or at home and mark when all bills need to be paid and pay them before the due date. You can even mark the dates a few days earlier, to be on the safe side. Late payments can stay on your record for seven years. The more you have, the worse your credit. Paying on time, will steadily increase your FICO score and lower your risk and your interest rates. After a year or two you can apply for another low limit card, which will help you spread your debt. Then you can ask your first credit card company if you qualify for higher limits. A higher credit card limit will also increase your credit score by decreasing your debt ratio.
The most important factor to consider when rebuilding credit from a bankruptcy is to pay all debt before the due date. This will help maintain and increase your creditworthiness little by little. With patience and organization, you will attain financial freedom and independence even after filing for bankruptcy.
To learn more about how you can help increase your credit score, go to Dr. Alan Rosenthal's website at http://www.financialsolutionservices.com where you can find more great information on credit improvement. And, you are cordially invited to sign up for a FREE Credit Repair and Enhancement Workshop by visiting http://www.financialsolutionservices.com/upcomingevents.html
For additional information listen to one of Dr. Alan Rosenthal’s credit talks at http://www.financialsolutionservices.com/credittalks.html
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