Filing for bankruptcy is not an easy decision to come to, especially since it leaves such a mark on your credit history. Unlike items that have gone into collections remaining on your credit report for seven years, a bankruptcy discharge remains there for ten years.
Rebuilding your credit post-bankruptcy is a challenge but it is not impossible. You will be starting over in essence but the climb back to financial stability will be steeper because potential lenders will see you as a high financial risk for a decade. There are steps you can take to improve your situation but realize that there will be no easy fix and it will require patience and planning on your part to get you back on your feet.
Small Steps To Good Credit after Bankruptcy
Once you have filed for bankruptcy and had it discharged in court, you will need to have a look at your credit report. You will be checking to see if the discharged bankruptcy and relevant accounts have been noted on the report. In the US there are three major credit bureaus - Experian, TransUnion and Equifax so you will need to check all three.
Fortunately, these reports can be purchased together so you can easily compare what's being noted on each report. All of the accounts you listed on your bankruptcy filing should be noted as being discharged in court. If you find that there are any items not properly noted, you will have to contact the credit bureau and the creditor in writing to have them corrected. There are letter templates available online to help you write to the credit bureaus and creditors as well.
You should try to open either a savings or checking account once your bankruptcy has been discharged, if you do not already have one. Usually banks ask for a minimum deposit to open an account so you might be able to open both a checking and savings account on the same day. Even though banks typically do not report to credit bureaus unless you have bounced a check, having an active account shows potential lenders that you are able to manage your finances and would be able to continue to do so if you were to borrow money in the future.
Reestablishing Your Credit Post-Bankruptcy
Another way to reestablish credit post-bankruptcy is to obtain a secured credit card. A secured credit card is one that requires you to place a deposit into your account with the lender or bank issuing the credit card. Your line of credit with a secured credit card is usually equal to that of your deposit so it will be a low amount, about 0 or 0. To keep building your credit line, you should aim for about ,000 with your card issuer and this is built up over time. You would make payments with a secured credit card in the same manner that you would with a regular unsecured credit card: on time and in full.
Try to pay off your balance each month and do so before the bill is due. So long as you stay within 30% of your available credit - for example, if you have a 0 credit line, you should have at least left at the end of your statement period in available credit, and pay your balance on time, you should be well on your way to adding more positive points to your credit scores.
Getting Your Post Bankruptcy Loan
Once you have reigned in your expenses by adopting a monthly budget and opened both a bank account and a secured credit account, you can apply for a loan. A good loan to qualify for after a bankruptcy discharge is a car loan. These loans are secured, using the new car being financed as collateral. Once you have established a consistent payment history with your newly opened accounts, you should qualify for other lines of credit and loans within a reasonable time frame. The whole process can take a year or longer but the time will be worth it to help get your back on the road to personal financial recovery.