If you have been through a bankruptcy, your credit is going to be wiped out. This can be both a difficult experience and a growing opportunity. While it can be difficult to reestablish credit after bankruptcy from nothing, it is also a clean slate to be able to get a good credit history this time around. Creditors know that you now have no debt, and there is no risk that you will be able to declare bankruptcy again. However, many creditors may be a bit skittish giving you credit after a bankruptcy when you have no established credit. There are a few methods that you can use to reestablish your credit.
- Monitor your credit report carefully. It is important to make sure that your debt-free status is reflected on your credit report and that all changes to your credit report are accurate. By checking your credit reports monthly, you will be assured that your credit history is accurate.
- Keep any current lines of credit open. If you have any credit accounts that are already open, don’t close them out of fear that you will abuse them. If you don’t want to use cards or plan to swear off credit, it is best to simply cut up your cards, not to close them entirely. Closing accounts reduces the amount of credit you have available to you, lowering your credit score. You never know when you will need that credit in the future.
- Pay all your bills on time. Your bill payment history makes up about 35 percent of your credit history, so it is a small action that can make a large positive impact on your credit score.
- Apply for secured or unsecured credit cards. Credit cards are often available fairly easily even if you have bad credit. The rates may be high, but if you pay off balances right away, it will not matter. While you should be cautious about having a large number of cards, one or two credit cards can help you build credit. It is best if you only have small balances and pay them off every month in full and therefore never pay any interest.
- Wait a year or two and then apply for a loan. A car or home loan that is paid on time every month will do even better things for your credit. Unfortunately unless you wait and build credit for a time after your bankruptcy, these loans may be unavailable or only available at very high rates.
- Know your credit limits. You will probably have low limits for a time after you declare bankruptcy. Make sure you know what these are and stay well below them. Going over your credit limit can really hurt your growing credit score.
- Beware of credit repair scams. Unfortunately there is no miracle fix to your credit score. Avoid any company that claims to be able to help you repair your credit at a cost. Many of these are scams and you are usually better of following these other guidelines to repair your credit.
It won’t always be easy, but in time your credit score will recover. Remember that bankruptcy isn’t necessarily a bad thing when you are overwhelmed by debt. By learning from the experience you can re-establish your credit and have better credit in the future.