How to Rebuild Credit After Bankruptcy

Rebuilding Your Credit After Bankruptcy

Rebuilding your credit after bankrupcty is a challenge, but it is possible.

Bankruptcy is one of the worst things you can do to your credit, and if you’re wondering how to rebuild credit after bankruptcy, then you’ve come to the right place. Bankruptcy appears on your credit report for 7 to 10 years. Sometimes though, bankruptcy is the only avenue you have to fix your finances, so in essence, you are damaging your credit it now, in order to save it in the future.

Nothing lasts forever however, and this also applies to your credit rating. Although bankruptcy is essentially a death sentence for your credit, with patience and a lot of perseverance, rebuilding credit after bankruptcy can start immediately.

Knowing that credit can be rebuilt can make you feel better, but your words need to be backed up by action. Your first step after filing bankruptcy is to ensure that the debts that got you into this mess in the first place are taken care of. In most cases, bankruptcy discharges only part of your debt, so you still have responsibility for your bills. Set up payment plans and ensure that you are saving enough money to make every single payment. When you have a history of good payments behind you, you can take the next step and start applying for credit. There are a few avenues to help raise your credit rating.

Monitor Your Reports

It’s very important to ensure that the credit reports that creditors use to summarize your financial responsibility and acumen, is 100% true and accurate, because there are times after a bankruptcy filing that some items are not reported properly. One of the common issues that appear on a credit report post bankruptcy is the accounts that were negotiated as part of the bankruptcy process not being recorded properly. These accounts continue to report as past due and your credit rating will not rise, it will continue to fall. Ensure every account that is applicable in bankruptcy is recorded properly. This helps current accounts with positive reporting history build your credit.

It’s easy to check your credit report. Your report is available for free at annualcreditreport.com. If you want to know the credit score, visit GoFreeCredit.com, which reports credit scores from the 3 largest credit agencies, and they offer a 7 day free trial. If necessary, write down the creditors contact information and contact them to have the bankruptcy details added to the account and credit record. Check on your credit report every 6 months after that to ensure there are no more errors.

Obtain a Secured Credit Card

Secured credit cards are an excellent way to establish credit, or repair bad credit

After bankruptcy, getting an unsecured credit card will be next to impossible, so the next best thing is to seek a secured credit card. Reputable secured credit card providers will report payment histories to the 3 largest credit agencies. Some of the cards come with annual fees, but the benefits to your credit and the rebuilding process make it worth the cost. To set up a secured credit card, you will need a savings account to register with the card. The deposit amount in this account will determine the limit that is available on the secured card. Aside from the savings account aspect, the credit card has the exact same powers as an unsecured card. The difference is that if you become past due on your payment, the creditor withdraws the amount from the savings account, and your limit is lowered to the new balance until the money is restored to the savings account to increase it. There are dozens of secured credit cards but a few stand out:

At 14.99% to 19.99% APR the Orchard Bank Visa card has a first year fee of between $39 and $59, with the continuing fee for any years after that of $59. This card is actually unsecured, and is aimed at people with a poor credit score. The credit limit will increase the longer the account is in good standing, which will also increase your credit score.

The Public Savings Bank Open Sky Secured Visa comes with a very reasonable APR rate of 11%. There are no monthly or application fees, simply the $59 annual fee. This is a flexible, long term credit solution to help rebuild your credit. The only other cost is $25 each time you raise your credit limit.

Get an Installment Loan

Although a difficult path, obtaining an installment loan can help rebuild your credit, the tricky part comes into play when considering the past bankruptcy. The loan amount should only be used as an interest bearing account, even a CD so that the loan can be serviced on time. The interest that is paid on the loan is offset by the interest you earn on the CD, and the length of the loan and CD should be the same. Paying more than the minimum on the monthly payment will lower the total interest paid on the loan, and will reflect well on your credit history.

Interest rates on CD’s are currently on the low end, however the interest on the installment loan should also reflect a low interest rate. It is relatively easy to sign up for a CD, and you can visit banks like Discover Bank or Ally Bank, your long CD interest rate can be between 2 and 3 percent.

Anyone can take the steps to rebuild their credit after a bankruptcy, you just need to know what tools are available and where to find them. This article highlights a few tips on how to re-establish credit post bankruptcy. No one solution is the key to credit success, but combined over a 5 to 10 year period, and a solid payment history, your credit score and credit history will once again be normal.