How to Secure Credit After Bankruptcy
Bankruptcy doesn’t mean the end of the road for a good credit rating. Sometimes, bankruptcy is the best financial choice, and it's not an uncommon one. According to the US Court System, 1.5 million people who filed for bankruptcy in 2010. All of them are working to rebuild their credit now, but not all of them are approaching it systematically. One Bankruptcy certainly hurts your credit rating, but you will appear to be in a better financial condition than you were before due to your improved ratio of income to debt. After you have filed for bankruptcy, there are five steps you must follow to begin rebuilding your credit:
1. Make sure the information on your credit report is correct. For the bankruptcy, you probably obtained credit reports from the three credit reporting agencies. If you haven’t, order them right away. The Fair Credit Reporting Act guarantees you access to your credit report for free from each of the three nationwide credit reporting companies — Experian, Equifax, and TransUnion — every 12 months. To learn more, go to the Federal Trade Commission. http://www.ftc.gov/bcp/edu/microsites/freereports/index.shtml
P.O. Box 740256
Atlanta, GA 30374
P.O. Box 2002
Allen, TX 75013
P.O. Box 2000
Chester, PA 19022
2. If anything is wrong or suspicious on your credit report, write a letter requesting the item to be removed. Include any documentation you have, like bills marked paid. You will have to remember to always get something in writing when a bill is paid off. Your bankruptcy should appear on your credit report after 30 days.
3. Do not waste your time and money on credit repair schemes. There is no one who can repair your credit but you. All it will take is a consistent and responsible use of credit, but as you know by now, that is not as easy as it sounds. What can be helpful is a credit counselor, who advises you on improving your credit and is often available to you for free from organizations like the National Foundation for Credit Counseling, rather than at credit repair company, which charges fees and claims to remove negative information from your report. The Federal Trade Commission identifies “credit repair for a fee” advertising as a scam and is actively prosecuting these companies when it can track them down.
4. If you are careful, a good option to keep your spending under control while rebuilding credit is a secured credit card. Like a debit card, you can only spend money that you have in the bank. The interest is usually very high, so charge no more than 30% of your limit and pay it off every month in full. Do not take more than three of these cards. Opening too many credit lines damages your credit. This is a slow but reliable way of improving your score.
5. About 18 months after your bankruptcy, if your credit report now shows on time payments, many car and mortgage lenders will be willing to grant you a credit line. Take it, but take the smallest amount you can and be dedicated to paying it on time. These types of loans help you build good credit faster, but you can’t make these payments, you may not get another chance. Learn more about car loans after bankruptcy here:
Rebuilding your credit takes persistence and planning but it is possible.
Photo courtesy of plαdys via Flickr