Bankruptcy has become one of the most feared scenarios every year among millions of Americans around the world. A report by Lending Tree showed that 40% of Americans have a credit score of over 640 a year after they filed for bankruptcy while 65% of them has the same score three years after bankruptcy. If you’ve been through it, you know exactly how it feels to see your credit turn into dust. However, there’s a way to bounce and start all over again.
Although you’ll be prone to higher interest rates and how you will be taken advantage by leaders who see your desperation as an opportunity for them to make more money, there are several things you can do to establish good credit again.
Eight Tips To Bounce Back After Bankruptcy
1. Create a budget and learn to love it. Tracking your expenses for a couple of months will give you an idea of your spending habits and how much exactly you spent. You need to create a realistic budget fitted within to your income per month and set boundaries towards your spending. You have to love doing it or else you’ll break down at the end. Purchase only what you need and save more.
2. Don’t be afraid of credit. You still need to establish good credit even after bankruptcy unless you prefer buying everything in cash such as a house or cars. Future landlords and employers would want to see how you were able to rebuild your credit as it gives a positive reflection on you.
3. Pay on time and watch your credit report. Regardless of how big or small your bills are, make sure you pay them on time. Any overdrafts or incurring bank fees will be shown on your credit report so you must keep up with your bills. Monitoring your credit report will also help you be mindful of your every move as you start over again. Be mindful of these things because it will affect you sooner or later.
4. Get a Credit Card and re-establish credit through a line of credit. Although it can be scary to get a credit card, it is still the best way to re-establish yourself. Some banks also offer a personal line of credit secured by a savings account known as secured loan. Although this helps re-establish your credit, the interest you pay on the line of credit is bigger than the interest you earn on the savings.
5. Don’t purchase a car yet. It’s easy to find an auto dealer willing to make the loan, it’s best to practice credit-building for a few years. Do not be desperate and give it time. People will see that you're responsible and can be trusted when the time is right so applying for mortgages or any type of loan won’t be as hard anymore. Most lenders will usually give you a two-year waiting period to rebuild your credit score although it does not always mean you can - your willingness and determination are what they’re looking for.
6. Long-term relationship matters. A long-term record with one or two cards will help you rebuild your credit so make sure you take good care of your relationships with them.
7. Don’t hesitate to approach lending businesses. What most people don’t know is that there are a lot of lending businesses who are understanding enough. If you maturely and responsibly explain to them that your situation will not be happening again and what are the circumstances of your bankruptcy, they will usually accept your reason. They know how things can be hard for some people.
8. Be watchful against scams. After your bankruptcy, you might receive a lot of messages from people who will promise to fix your credit. It’s important that you understand that re-establishing your credit is hard work and free too. Although it doesn’t take overnight, it is something you will be able to do by yourself. If someone asks money from your right away or it seems to be too good to be true, watch out. Alert the credit bureau or state regulatory agency as soon as possible.
The key is to look at bankruptcy as a positive situation. Once you start to use cash and live within your means as well as follow the rest of the tips mentioned above, there’s no reason why you won’t recover quickly from bankruptcy.
