Job layoffs, reductions in work hours, and the real estate crisis have put many Americans into a financial bind in which bankruptcy has become unavoidable. It’s a scary situation, especially when you want and need to get on with your life and you know you may want or need to use credit again in the future.
You already know that a bankruptcy will remain on your credit report for ten long years. That’s not good, but there is a small “up side” to the situation.
One factor that many don’t consider is that after bankruptcy you may be seen as a better credit risk than before the bankruptcy. This is because you are no longer buried in debt, and because the law prevents you from filing again for 8 years.
This means probably won’t be entirely without credit for those ten years – especially not if you take steps to repair your credit as quickly as possible. You will, however, be subjected to higher interest rates and lower credit lines – especially during the first years.
So what can you do to rebuild your financial life and get back to some kind of normalcy?
The bankruptcy wiped the slate clean, so your task becomes one of building a new and better credit file – so get started right away.
Begin by controlling your spending and saving money in small ways that, taken together, can create a large impact. Doing so will enable you to stay current with your obligations going forward. This first step is all-important.
Next, begin rebuilding a good credit history. Search for a “bad credit credit card” or apply for a secured card – first making sure the one you choose reports to the credit bureaus. Then use the card sparingly. Charge no more than 30% of your limit and pay the balance in full each month.
If you have a parent or sibling with good credit, ask to be added as a user on a credit card that they use sparingly. Don’t actually use the card to get back into debt. That won’t do you or them any good.
Be sure that all utility payments are made on time – because while they may not report your account in good standing, they will report if it’s in default.
Begin building a reserve in your checking account, so you’re never in danger of an overdraft, and open a savings account.
Author: Mike Clover
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