Bring your credit back in order after filing bankruptcy

Filing a bankruptcy doesn’t mean that it is the end of the world. Instead, it is just the beginning of a new one. Grab this opportunity to start new habits, which will help you to build a solid financial footing for you and your family. Though a bankruptcy will stay on your credit report for some years, yet you can start qualifying for loans in 2 years of time. All you need to do this follow some steps that will help you to rebuild your credit profile after a bankruptcy.

At first, you should know that a bankruptcy will not remain on your credit report forever. It’ll stay on your report for about 10 years if you’ve filed a Chapter 7 bankruptcy and 7 years in case of filing a Chapter 13 bankruptcy. However, the harmful effects will start diminishing as soon as you get dismissal or discharge from bankruptcy.

Here are 3 steps that will help you to rebuild your credit profile after filing a bankruptcy.

1. Correct your previous mistakes: The first step to recharge your credit profile is to learn from your past mistakes and correct it in order to prevent it from happening again in future. Check whether or not your overspending habit was the cause of your bankruptcy. Apart from changing your spending habits, you should also try to have enough savings so that you can survive a financial setback, be it a job loss or an expensive medical treatment.

2. Try to get new credit: The best way to rebuild your credit profile is to apply for new credit. You can try to get 2 types of credit –

(1) Installment loans and (2) Revolving credit.

They are described below.

• Installment loans – After a bankruptcy, it’ll be difficult for you to get a secured installment loan, such as, a car loan. However, you can try for an unsecured personal loan. Though you’ll have to pay comparatively high interest rates on your loan, yet it’ll help you to rebuild your credit profile. Make sure that you make the monthly payments on time. If you’re not discharged from any your installment loans (such as, student loans), then make the payments on time and if possible, try to repay more so that you can pay off the debt fast. It is one of the best ways to improve your credit score.

• Revolving credit – It is quite difficult to qualify for an unsecured credit card just after a bankruptcy. Therefore, it is advisable that you to get a secured credit card. You can easily obtain it by depositing an amount at the issuing bank and your credit limit will be equal to your deposited amount.

3. Monitor your credit reports for any inaccuracy: Order your credit reports and check whether or not there are any open and overdue accounts, which were closed and the obligations were waived off during the bankruptcy process. If you find any inaccuracy, then you should immediately contact the credit bureaus and request them to report the accounts properly. It will help you to recharge your credit profile.

If you follow these 3 steps, then you’ll be able to rebuild your credit profile and improve your credit score quickly.