If you are not familiar with the bankruptcy process, you might believe that filing for bankruptcy will ruin your credit forever and make you ineligible for credit cards and mortgages. However, this is simply not the case. Although bankruptcy will affect your credit negatively, its effect is only temporary. With a little effort on your part, you can rebuild your credit and return it to where it was before the bankruptcy (or even make it better).
Check your credit scores
The first thing to do after your bankruptcy is finalized is to assess the damage to your credit by reviewing your credit reports from the three major credit reporting bureaus-Experian, Transunion and Equifax. Each bureau will likely have a different metric for measuring your score, so it is important to review all three reports.
Your credit score is important, because lenders will use it in assessing your creditworthiness when applying for a mortgage or car loan. In addition, many jobs require a positive credit score from their applicants in order to be considered.
Since your credit score can influence many important aspects of your life, it is important to ensure that the information on the report is accurate. When reviewing your reports, make sure that all credit cards and accounts that you closed are accurately reflected. If you find a mistake, inform the credit bureau to correct it, as it may impact your credit score.
Get a Credit Card
It may seem counterintuitive to apply for a credit card after your bankruptcy. However, if used responsibly, credit cards can help you rebuild your credit profile fairly quickly. Due to your bankruptcy, you may not qualify for traditional credit cards. If this is the case, apply for a secured credit card-a card that requires you to put down a deposit that equals your credit limit.
Once you have the card, make sure that you pay off the balance in full each month. In addition, experts recommend charging no more than 10 to 30 percent of your credit limit. Over time, you will demonstrate that you are a safe credit risk. As a result, your credit score will gradually increase.
Be financially responsible overall
Credit cards are not the only obligations that need responsible handling. As up to 35 percent of your credit score is determined by your payment history, it is important to ensure that your other bills-mortgage, rent, utilities etc.-are paid on time as well. In addition to making your credit score look good, timely payments can improve your chances of qualifying for a loan or mortgage, since lenders may ask to see evidence of at least a year’s worth of on-time payments of your regular financial obligations.
If you are struggling with debt, it is important to seek help before your situation worsens. An experienced bankruptcy attorney can advise you of the various debt relief options (bankruptcy and non-bankruptcy) that are available to you.
