Perhaps you’ve been overwhelmed by debt and you’ve made the tough decision to file for bankruptcy. Now, you’re ready to emerge from your bankruptcy and you’re eager to rebuild your credit. After years of structured payments and limited borrowing power, how do you go about doing that? What do you need to know?
- Bankruptcy lingers: Some types of bankruptcy, like Chapter 7, remain on your credit report for a full decade. However, even if you filed under Chapter 13, which requires partial repayment of your debt, your credit report will reflect your bankruptcy for seven years.
- Credit cards can help: You may worry that credit cards helped to create your debt problems in the first place, but the right kind of credit card (and a careful repayment schedule) can help to re-establish your credit. A secured credit card, that is, one for which you make a cash deposit as collateral securing your repayment, allows you to extend your purchasing power.
- Take out a loan: This measure also might seem counter-intuitive but taking out a small loan (and assiduously paying it on time) can help to show that you’re a good credit risk. You may be able to take out such a loan through a credit union or a bank with which you have a dependable history. As long as you don’t overextend yourself by borrowing too much, a loan can improve your credit score and your financial outlook.
- Pay attention to budgets and calendars: The best way to help yourself out of bankruptcy is to establish a budget and stick with it. You should also pay attention to when bills are due and what minimum payments you need to make on credit cards and other debts.
Emerging from bankruptcy can be a daunting process, but a few simple steps can restore your financial health.