Guidelines to Rebuild Credit after Bankruptcy
Posted by Joseph Franks on May 14th, 2020
Going broke and being harassed by creditors is a situation nobody wants to experience. The pressure of crippling debt forces half a million Americans to file for bankruptcy every year. Bankruptcy has its pros and cons, but it is usually considered the last resort to overcome a difficult financial situation. One of the biggest disadvantages is that it ruins your credit score and remains on your credit report for ten years. The bright side is that you get a clean slate, which is the chance to get back on your feet debt-free. Orange county bankruptcy attorney offers some helpful tips to rebuild your credit score post-bankruptcy:
Assess your Financial Standing
Before you go ahead planning your fresh start, take a look at your credit report to have a clear idea of where you stand. Check for any errors in the report that could further deteriorate your position, and get them corrected. Your credit score may not be as bad as you expect and you can improve it greatly within one year if you commit to making better financial decisions.
Budget and Savings
You may have to reevaluate your lifestyle post-bankruptcy. Make a list of your necessities and sacrifice some of the luxuries. Make it your primary goal to save at least 10% of your monthly income. Set up a savings account to secure funds for a rainy day; this way you will not have to rely on borrowed cash or credit cards for supporting your needs until payday.
Timely Payment of Bills and Secured Loans
In order to grow out of the negative impact of bankruptcy, you need to prove yourself as a reliable spender. There is no better way to show your dedication than being punctual about due payments. Pay your bills and secured debt installments (such as student loan) on time to boost your credit score.
Apply for a Secured Credit Card
Following bankruptcy, it is likely that all your credit accounts are closed. However, this does not imply that you cannot acquire a credit card for the next seven to ten years. There is no denying that getting your hands on a standard credit card will be nearly impossible, so you can go for a secured one instead. You have to pay the issuer upfront, so there is zero risk not paying back or committing credit card fraud. It is an effective exercise to demonstrate good spending habits and increase your credit score.
Attain Authorized User Status
If you do not qualify for a secured credit card, you can start with authorized user status. You will have to ask someone with excellent credit score (preferably a close friend or family member) to let you be an authorized user on their card. Their responsible behavior with credit usage will reflect on your score as well.
Get a Co-signed Credit Card/Loan
It might be too much to ask, but you might have someone who is willing to co-sign your credit card or loan. A spouse or partner with good credit history might agree to support you. He/she will have to risk their own reputation and face credit limits to make up for your deficiencies. Anyone who co-signs with you can be held liable for your bad financial decisions.
About the AuthorJoseph Franks
Joined: September 16th, 2019
Articles Posted: 238
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