Bouncing Back After a Bankruptcy

Review your credit report

After 60 days of closing the bankruptcy case, request for your credit report. Check for any errors (inaccurate, outdated, incomplete or unverifiable information) which can be legally corrected or removed by the credit report agency. Write a brief statement to the agency explaining the reasons that led you to file for bankruptcy and what you’ve done to solve your financial problems. This explanatory statement (30- 50 words long) will always appear on your credit report unless you request for it to be removed.

Get a secured credit card

With a bankruptcy charge, it’s important to demonstrate that you are credit worthy. Get approved for a secured credit card. With this type of credit card, you are only allowed to spend what you’ve deposited in your account ahead of time. Make timely payments before any interest accrues so that the bank can forward a good account history to the reporting agency.

Choose a secured credit card from an issuer who reports to one of the three major credit reporting agencies to ensure it helps to rebuild your credit score. Try not to apply for too many credit cards (or new credit) because creditors always check your rating before approval and this may lower your score.

Automatic payments

To rebuild your credit by making sure you pay all bills on time, choose to automate all your recurring bills. This includes rent and utilities. Consider taking steps to reduce your monthly bills such as moving to a cheaper home where rent and utilities costs less, getting rid of cable and cell phones.

Set a realistic budget

Write down your expenses for the last three months and compare this with your monthly income. Set boundaries as to how much you can spend by making sure you live within your means.

Using your bank account

Always avoid overdrafts, bouncing checks or incurring bank charges. Use your bank account responsibly because whatever you do will show up in your credit report. Even the small bills should be paid on time.

Make smart financial choices

Avoid any situation that will put you in debt again. Whether it means changing your group of friends, taking a different route to work so you don’t pass your favorite mall or cutting back on eating out, simple changes can make a big difference to show the credit company you’ve reformed.

Set aside an emergency fund

Work towards rebuilding your savings by setting aside 5% of your net income every month. You can set up a standing order at your bank that automatically withdraws the money from your checking account and sends it to your savings account. It will help you to avoid borrowing money or worse, taking a payday loan during emergency situations.

Share your plan

Talk to your family regarding the bankruptcy case and the mistakes that led to that experience. Let them understand what lifestyle changes need to be made in order to rebuild your credit. Some members of your family can really hold you accountable.

The situations that led you to file for bankruptcy did not happen overnight. In the same way, it’s likely to take some time before you can rebuild your credit history. The key is to learn from your mistakes and make sure all your payments are made in good time, all the time.

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