Post-Bankruptcy Credit Improvement

 

So you did that dreaded thing people call reputation suicide and you filed for bankruptcy now your credit is likely as low as it's ever been. But it doesn't have to stay that way. The moment you declare bankruptcy, there are actions you can take to immediately start rebuilding your credit. 

You are getting a fresh start and it's important to build a solid foundation of knowledge so you can avoid the pitfalls that led you to bankruptcy in the first place if it was poor personal financial management that led to bankruptcy in the first place. 

Here's how to start improving your credit score right after a bankruptcy event. 

Do a Careful Credit Report Check

 

Look over your credit reports. All three of them, Experian, TransUnion and Equifax. Then look them over again. Carefully check that each and every existing account is being reported properly in all three credit bureaus.

Old debts that were wiped out by bankruptcy should indicate a "BK" status. Debts that aren't reported properly can continue to damage your credit score, so make sure that any debts included in your bankruptcy filing are now "cleared debts" are indeed being reported properly.

 Pay Your Mortgage and Rent On Time

 

If you managed to keep your house in the bankruptcy process, make sure you do everything in your power to pay your mortgage on time. 

Your mortgage has a bigger impact on your credit than anything else. If you can manage to keep it current, that'll really help your credit score. If you go delinquent on your mortgage, the rest of the techniques in this article won't help all that much. 

If you are still struggling to make mortgage payments call your loan holder and try your best to refinance your mortgage loan. It's possible to refinance a mortgage after bankruptcy. If you are living in a rental PLEASE do yourself a favor and pay your rent on time! Your rental payment history can now be used to boost your credit score. 

Get a Secured Credit Card 

Get a secured credit card as soon as possible to start building up your post-bankruptcy creditworthiness. 

A secured credit card entails you putting down a small deposit, usually between $300 and $1,000, to open a cash-backed account. Your money will be held as collateral. You can then use your card as a credit card. Pay it off every month, on time, to start rebuilding your credit.  

Do your research and make sure that Secure Credit Card payment history is being reported to all three credit reporting agencies. 

Cutting Your Spending 

Having to file bankruptcy means that at some point in your life, you spent more money than you really had. In order to prevent that from happening again, you need to make sure that you're regularly making more money than you're spending. 

Any additional cash you earn can be used to improve your financial situation. It can be used on improving credit, paying off debts that weren't wiped out during bankruptcy, or building savings. 

Start by cutting back on auxiliary spending. Move into a smaller house or apartment if you can. Try to save 10% to 20% of your income every month. There is a whole other blog post on that coming soon. 

Make a Small Installment Purchase 

An installment purchase is treated differently on your credit report than revolving credit (e.g. credit cards). They're treated with more weight. 

An installment purchase includes car loans, home mortgages or even furniture purchases that are paid off in installment form. 

Make sure that any installment purchase you make is reported to all three credit reporting agencies. Getting installment loans and paying them off on time can do a lot for rebuilding your credit. 

Don't misunderstand me here, one loan at a time pay it off and then do another. You are rebuilding your credit worthiness not digging another grave.

If you apply these techniques, your after-bankruptcy credit can improve to the point where you can open new unsecured accounts within 2 or 3 years.

GOOD LUCK!