Repairing Credit after Bankruptcy
Some people are under the misguided belief that after a person has filed bankruptcy their credit is ruined for life. To be honest, after you have filed Chapter 7 and had your past due debts discharged, you begin your credit with a clean and fresh start. Now your credit is bad and the bankruptcy filing will appear on your credit report. However, you do have the opportunity of repairing your credit after bankruptcy.
After you have filed Chapter 7, the bankruptcy can show on your credit report for up to ten years. During this ten year period you can start to rebuild your credit. Rebuilding credit after bankruptcy will take you a little time, but with just a little patience, and planning, your credit scores will once again be as high as they were before your filing.
The very first step to your credit repair will be to correct the situation that created your financial instability. This may have been caused by a change of jobs, or illness. Sometimes this happens when people get too much credit and do not use it correctly. Let your situation improve some before you start trying to begin a new credit life.
If your financial situation was caused by too much credit, then you are getting the second chance you need to do this credit business correctly. Credit cards can sometimes come too easily and get us in over our heads financially. This time though you know exactly how to handle your credit cards and your other types of credit. Your credit score may even become higher than ever since you have learned so much about using credit. However, if you do not change your behavior, you could end up even worse off than prior to filing for bankruptcy.
The next thing you want to do is try and save a little money. Since your outstanding debts have been discharged you have a little extra cash that you were paying to them. Place some of this cash in savings. A savings account will also help you in the next year or so to receive other forms of credit. Try to deposit at least a small amount in the savings account on a regular basis. This is considered building a savings history.
When you have a little cash saved up, apply for a secured credit card. Secured credit cards are very easy to get since you send the credit card company cash money to hold as security. Having this secured card will mean you can start building a record of timely payments. These cards report the way you pay just like the other type of credit card. The longer you have the card the more of a payment record you will established.
You can also apply for store cards. Store cards are only good for merchandise in the store they are issued from, and are often easier to obtain than other credit cards. Once again make certain you pay the monthly payments on these cards in a timely fashion. The payments to these smaller cards are establishing your new credit history as well.
Once you have begun to re-establish your credit you should try to get another type of credit. Credit cards are considered revolving credit, they do help to rebuild your credit scores, but you also need to show a history of an account that has a monthly payment for a set number of months.
After bankruptcy loans such as a personal loan from your bank, or financing a car would fall into the second type of credit you need to have to re-establish a positive credit history. Do not get disappointed if it takes you a little time to get this type of credit going again. The best thing you can do is apply for this type of credit at the bank where you have your checking and savings accounts.
When you make a personal loan, or a car loan add $25.00 to each monthly payment. If you are suppose to pay $250.00 then pay $275.00. This extra amount will be applied to the principal of the loan. So you will be paying the loan off quicker, and saving yourself interest on the principal. This method of payment reflects very well on credit scores.
Many people wonder what their chances are of buying a house after bankruptcy. The chances are very good if you start slow and build your credit history responsibly. Pay your obligations on time, and do not try to rush into too much debt at once. A little patience and persistence will be your best tools.
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