Time To Rebuild

Credit after bankruptcy is possible and being proactive about repairing your credit can help you to change your financial life moving forward.  The fact is bankruptcy is a way to improve your financial state by having all of your debts wiped clean.  Yet, it is also an admission of failure in being able to manage your expenses.

Therefore, it is essential to find a way to repair your credit that helps you reestablish your ability to use credit wisely.  When lenders and further credit providers look at your report, they want to see that since you have had your bankruptcy that you have used credit wisely.

Bankruptcy will stay on your record for the next ten years.  It is often a misunderstanding for some individuals that bankruptcy will in fact keep you from getting any credit at all.  This is not true.  The amount and type of credit you get will depend on many things, including your ability to pay, the type of credit you are getting and the amount of time that you have had since you filed bankruptcy.  Keep in mind that making smart decisions at this point is a very personal decision.  Ask yourself if you can be trusted with any type of credit card before you jump into these cards and find yourself with a sizable amount of debt and no way to repay it.

Right After Bankruptcy

Once your bankruptcy is discharged, the debts included on your bankruptcy are no longer a requirement of you to repay.  Some people determine that they still want to repay those debts and therefore go about doing so.  It is also common that people will continue to pay on mortgages and car loans, assuming this is acceptable in their state (and usually these types of loans aren’t included in the bankruptcy if you plan to keep repaying them.)  If you have a car loan, a house loan, or even a student loan, these are your building blocks for credit repair.  Use them to help you establish your ability to pay your bills on time, and regularly.

Within 6 to 12 months after you have a bankruptcy discharge, you are likely to see credit cards come in.  Remember that these lenders know that you cannot file bankruptcy again for at least 7 year (in some cases longer) which means that you will have to pay them throughout the next 7 years.  These initial credit cards after bankruptcy often have very high interest rates.  They also have a number of fees associated with them including one-time application fees, membership feels, annual fees and even account set up fees.  For example, a credit card offer may come in to you offering you a credit limit of $300 but $250 of that is already all the fees you need to pay.

Should you use these credit cards?  If you want to establish your credit, you can, but do so cautiously.  Select one with the best fee schedule and use it only one or two times per month.  Put it away and don’t ever carry a balance on it. Pay it off in full at the end of the month.  Doing this will help you build a credit history. What’s more, you will see that over time, your credit card offers will improve with lower fees and interest rates.  This process is slow, but over time you’ll have plenty of additional offers to choose from.

You may also want to consider a secured credit card. This type of credit card is designed to provide you with a line of credit that you secure with a deposit.  You make a deposit of $500 and then you can borrow against that $500 as you need to.  The benefit here is that you can use it like a credit card whenever you want and repay it each month.  Perhaps the most beneficial reason to use this type of account is when the company holding the card actually reports to credit bureaus.  If they do, this will allow you to have more opportunity to build a good credit record.