Best Ways to Rebuild Credit After a Bankruptcy

Filing bankruptcy and going through the process is a stressful period that often ends with a lower credit rating. For the next ten years, any lender who reviews your credit file will take note of the bankruptcy, which may prompt them to deny your request for credit. However, even with a bankruptcy, some lenders will overlook this mishap and be willing to extend credit to you. The key is rebuilding your credit history after a bankruptcy and raising your score.

Create New Lines of Credit

A bankruptcy wipes out your debts and eliminates old credit accounts. You don't have to include all your debts in a bankruptcy; however, if you do, opening new lines of credit is crucial to rebuilding your credit history. There are several ways to accomplish this. Since your chances of getting a major unsecured credit card are slim after a bankruptcy, it's wise to consider secured credit cards. These cards require an upfront security deposit that serves as collateral. You can get these cards with no credit history or bad credit and many banks and credit unions service these accounts. Request an application from your local bank branch. In addition to secured credit cards, securing an auto loan after a bankruptcy also helps raise a low FICO score. The automobile serves as collateral and many small, private dealers offer bad credit auto loans. While you'll pay a high interest rate, the trade-off is a better credit score in the near future.

Timely Payments

Opening a new line of credit is only the first step to rebuilding credit after bankruptcy. You have to prove that you're capable of managing your debts and this entails respecting due dates and sending payments on time. Each late arrival reduces your credit score, which causes further damage after a bankruptcy. Quite the opposite, paying your bills on time each month gradually increases your score. There are ways to ensure timely arrivals. Many creditors have websites that allow debtors to submit payments online and telephone payment options are also available. Utilize these provisions to avoid late fees and a lower credit rating.

Debt Management

Overspending and carrying high credit card balances often contribute to bankruptcies. Rather than make the same mistake twice, learn how to control your spending and avoid excessive debt. Using credit is imperative to rebuilding credit, but this doesn't give you a license to overindulge or live beyond your means. Only charge what you can afford to pay off by your next due date. If you don't have the cash to pay off your credit card within a month's time, leave the item in the store and save for the purchase.