Rebuilding Personal Finances After Bankruptcy
There is good news for individuals who have filed for bankruptcy: when it comes to credit, nothing lasts forever. Even if the bankruptcy was filed only yesterday, individuals can successfully apply for loans if they immediately adopt new financial habits. Yes, a bankruptcy can be devastating on credit scores, but the after-effects do not have to last. Fortunately, there are several steps that bankrupt individuals can take in order to start rebuilding their personal finances immediately.
If your personal finances are all handled in cash, this may be a good idea if you simply cannot handle credit. The bad news is you have to get and use credit in order to establish a good credit score. This is because the credit score must remain current to provide an accurate representation of your financial life. Maintaining good credit involves using credit responsibly.
The first and immediate step in rebuilding credit is to clean up your credit report. While a bankruptcy can stay on your record for ten years, the effects of it do not have to last that long. Correcting your credit report can drastically improve your score, because that three-digit number is calculated from the information on your report.
Credit reports can show accounts that were supposed to have been closed and wiped out as being open and overdue. Unfortunately, this is a common occurrence with post-bankruptcy credit reports. The solution is to call the credit bureaus and demand that those accounts be reported as included in the bankruptcy, which of course they were. Please take note that this is the only way to recover your credit; without taking this step, it is impossible due to the supposedly open accounts.
The next step is to apply for a new credit card. This may seem like an odd step to be taking in the wake of a bankruptcy, but it is the best way to gain access to credit. Since you probably will not qualify for an unsecured credit card after a bankruptcy, although it is certainly possible, apply for a secured credit card. A secured credit card is a card that has a credit limit equal to the amount that you deposit at the bank that gives you the credit card.
Usually the limit is small, around two hundred to five hundred dollars. Compared with the former credit limits that you enjoyed, this can seem like chicken feed. However, it is imperative that you do not use all of your available credit. Use only thirty percent of the available credit for purchases. This is for the sole reason of paying back the balance in full at the end of each month.
There is even more good news in this regard; you do not have to carry a revolving balance each month or carry interest payments in order to get a good credit score. This is a false piece of information that too many people believe to be true. Break the habit of charging more than you can pay every month now.
