Rebuilding Credit After Bankruptcy—Five Effective Ways
Credit repair after bankruptcy can be tough, especially with a badly bruised reputation. Despite feelings of defeat, your future stability demands action in the months ahead. Reestablishing yourself as a trustworthy borrower is imperative to improving your credit score. When you’re ready to put the past behind you, begin by making a fresh start. It’s up to you to take control of the credit repair process. Consider the factors below when choosing the right path. They will help you reclaim your footing.
1. Open a checking or savings account
Credit repair requires timely (and visible) bill payments. Help your cause by opening a checking or savings account for this sole purpose. Assign expenses to the deposited cash and establish responsible habits accordingly. This strategy will help you maintain a positive bank balance and recommend you as a trustworthy customer.
2. Substitute safe credit for cash
Use everyday spending to rebuild your reputation. Apply for a gas card rather than using cash or debit at the pump. To reclaim creditworthiness, begin by applying for a secured credit card. This method requires you to deposit a qualifying amount (e.g., $300) into a bank account to establish the credit limit. Borrowing in accordance with your savings allows you to prove that you can pay off debt while also guaranteeing the necessary cash flow. It’s a win-win.
3. Become an authorized user
If a family member or friend is eager to help, ask to become an authorized user on one of their credit accounts. While you should not ask for access to their funds, attaching your name to a positive credit history can have a positive impact on your credit score. Sit down and outline your plan with the generous party. Make it clear that you would like to benefit from their credit rating, not their money.
4. Get a loan (and a cosigner)
Once your score improves, it’s time to reenter the world of borrowing. Applying for a small installment loan will illustrate your ability to handle credit and adhere to specific payment terms. If you struggle with approval, ask a friend to stand by you and cosign. Note: If this is the avenue you choose, make sure you are up to the task. Don’t leave loved ones in the lurch by sticking them with the bill.
5. Plan for the future
Recovering from bankruptcy is more than atonement for the past. Adopting new habits and making wise choices are imperative for future stability. Although you may be working hard to restructure and repay old debts, don’t forget about the expenses of tomorrow. Deposit whatever you can for retirement and emergency savings. Bankruptcy is the last stop on the path of financial trouble. Ensure the mistakes of yesterday do not repeat themselves down the road. Be prepared for life’s upcoming expenses. Some forethought will help you leave your current troubles behind.