HOW TO REBUILD CREDIT AFTER BANKRUPTCY
So you've filed for bankruptcy but now what? You've gotten a fresh start from bankruptcy and this time you want to make sure your financial future is secure so this doesn't ever happen again. But how and where do you start? This article will discuss the steps you can take to build back your credit so that you can finally get your financial life back on track.
First and foremost, make sure that you pay ALL of your bills on time. This is so critical after bankruptcy. The quicker you show that you're responsible by paying your bills on time, the quicker you will see your credit score increase. And as more time passes and you establish more credit, the effects of bankruptcy will lessen. However, if you have a late payment or get put into collection after bankruptcy, your credit score will take another beating and lenders will still look at you as a bad risk.
Create a budget so that you keep your spending under control and stick to it. You don't want to repeat the same mistake that caused you to file for bankruptcy in the first place so creating a budget is crucial to making sure you stay on track financially. The first step in creating a budget is finding out your average monthly income. Write down all your sources of income and take into account any kind of overtime or bonuses. Next you'll want to list all your monthly expenses so you can see how much you're spending each month. You'll want to keep all your receipts and bills and write down the actual amounts so that you know how much you actually spend versus simply guessing what you spend each month. Many people underestimate how much they spend and some expenses will vary throughout the year (ie gas, electricity, taxes, etc.). By writing down the actual amounts, you can accurately determine if you're living within your budget or going over it. You'll also be able to see trends in your spending so you'll know where you can cut costs and you can adjust your budget accordingly.
Start putting aside money for an emergency fund even if it's not a lot. While your main focus after bankruptcy is to make sure you pay all your bills on time, you'll also want to make having an emergency fund a priority. Once you have your budget in place, start setting aside some money each month for your emergency fund. While you probably can't save enough to cover 3-6 months worth of expenses as most experts suggest, you can at least start saving up for minor emergencies. You'll never know when an unexpected expense will pop up and you'll want to be able to have that cushion.
Get a credit card that will help you rebuild credit. One way to help rebuild credit is to look into getting a secured credit card. A secured credit card is a type of credit card where you deposit cash into the card and that deposit becomes your credit limit. You can only charge what is available on the card so beware of fees and additional charges. You'll want a card that doesn't charge an application fee and one that has lower interest rates and fees. If you're a credit union member, ask if they offer secured credit cards because they typically will have lower interest rates and fees. If you can establish a good payment history, some banks will even add to your credit limit and you could qualify for an unsecured credit card within a year. Lastly, make sure that your card payment history gets reported to the credit bureaus so that it's positively factored into your credit score.
Don't beat yourself up over your present circumstances . If you've filed for bankruptcy, just know that you are not alone. There are many people who have been or are currently in this situation. Yes, this will be a tough time in your life but it won't last forever. You don't have to let bankruptcy define you. View this as a temporary setback and look forward to the possibilities of the future. The point of filing for bankruptcy is to get back on track financially and to get a new start on life. So make the most out of this opportunity that you've been given and create a new path for yourself.