After bankruptcy the first question that many ask is, “how long does it take to rebuild my credit?” The answer? It can take time, but it won’t take forever.
To help you get started, here are five things you should do to rebuild your credit after bankruptcy.
1. Take Your Time
Accept the fact that it will take time to rebuild your credit. In some cases you’ll need to wait 18 to 24 months before you can qualify for a mortgage or an auto loan, but more than that you need to allow yourself the time to adjust to your new financial situation.
After bankruptcy, you often find yourself inundated with offers for new credit cards and new lines of credit. The downside is that because of your bankruptcy; you’ll likely be charged interest rates that are two to three percent higher than conventional rates.
Instead, look for safer alternatives such as the ones listed below.
2. Pay Your Bills Every Month
One of the best things you can do to improve your credit is to pay your bills consistently every month. You can also consider this a good yardstick of your financial situation. If you are able to pay your rent or mortgage and all of your regular bills every month, and still have funds left over for savings and discretionary spending, you’re in good shape. If you find you’re struggling to pay your bills on time, it may be a sign that you need to re-examine your budget plan and/or find ways to cut expenses.
3. Get a Secured Credit Card
Instead of an open line of credit, a secured card requires a cash collateral deposit that becomes the credit line for the account. For example, if you put $1000 in the account, you can charge up to $1000.
Rates and terms can vary from lender to lender, so it’s a good idea to do some research. Often credit unions and other non-profit banks are a good option, so consider them as well as the larger commercial banks and credit card providers.
Over time, you may be able to add to the deposit to extend your credit, and sometimes a bank will reward you for good payment and add to your credit line without your needing to include additional deposits.
4. Get a Gas Card or Retail Card
One good thing about gas and retail cards is that they don’t require applicants to have good credit. By signing up for these, you can start to rebuild your credit. However, keep in mind that these cards can carry high interest rates. If you use them, make you pay your balance every month.
5. Get Help
Working with a debt and budget counselor can also help you to improve your credit. By examining your credit report, you can find issues and errors that are hurting your credit score, and by taking advantage of debt and credit counseling, you can find ways to save money and lower your outstanding debts.
Looking for more ways to improve your credit after bankruptcy? We invite you to take advantage of our credit analysis service. We can provide you with a detailed review of your credit report, a budget review, and a plan of action to improve your credit in a way that is effective and responsible.