Repairing Your Credit after a Bankruptcy
April 5, 2016
More than 1 million people file bankruptcy in the United States every year. For many, a bankruptcy is not the end of their financial life, but rather the beginning of a new one.
After your bankruptcy has concluded, you may be more eligible for credit than beforehand, since you have become more attractive to lenders for the following reasons:
–Any discharge of debt immediately improves your debt-to-income ratio, and
–You are less of a credit risk because you cannot file bankruptcy again for another 8 years.
However, the type of credit available to you will be extremely limited and will often carry high (sometimes ridiculously high) interest rates. Furthermore, the bankruptcy will remain a black mark on your credit report for up to 10 years.
Steps Toward Strengthening Your Credit
Repairing your credit after a bankruptcy will take time, patience and perseverance – the sooner you get started, the better. You can begin by taking the following steps as soon as your bankruptcy has concluded.
Step #1 – Pull a Copy of Your Credit Report
Make sure that all of the debts that were discharged or affected by your bankruptcy are listed accordingly and that there are no other errors.
Step #2 – Apply For New Credit
The best way to obtain new credit is through a secured credit card. Almost everyone qualifies for a secured credit card because you are required to secure the account with a cash deposit. Even secured credit is credit, and it can be very useful.
For instance, you may be able to deposit $500 and receive a $1,000 credit limit or, in the worst case, you will receive a credit limit equal to the amount you have deposited. If you pay your bills on time, within a year or two you may be eligible for an unsecured credit card with higher credit limits and lower interest rates.
Step #3 – Start Repairing Your Credit History
Make reasonable and regular purchases with your secured credit and pay off the entire balance every single month. This will allow you to accomplish two things:
-Build a new credit history, and
–Create better repayment habits.
Just remember to be careful. Secured credit often comes with high interest rates. Never spend more than what you can pay off entirely every month. The goal is to show potential creditors that you can be trusted to repay your bills, not to fall back into debt.
Step #4 Start Saving Money
Start a regular habit of putting some money into savings every pay period. Having emergency savings available will allow you to avoid tapping into credit whenever an emergency situation arises.
Step #5 Learn From Your Previous Mistakes
Be cautious not to repeat the mistakes that led you into bankruptcy in the first place, if financial mistakes were indeed the cause. Filing bankruptcy does not make you a bad consumer or business person, but repeating the same bad financial behavior does.
Are You Considering Bankruptcy? Contact Jodat Law Group Today
Jodat Law Group has been helping Florida residents evaluate their options and file for bankruptcy for more than 20 years. Offices in Sarasota, Bradenton Clearwater, Venice, and Tampa. For more information about the process or to find out if filing for bankruptcy is right for you, request a free consultation online today or call us at 877-735-0265 now. You will speak with one of our aggressive and experienced bankruptcy lawyers face-to-face.