Declaring bankruptcy is rough, but it is not the end of the world. With a little careful planning, you can re-grow your credit and build it up stronger than before.
However, it is going to take a little patience. In this article, we will talk about some steps to take to repair your credit as fast as reasonably possible.
Let’s explore some post-bankruptcy tips to repair your credit fast!
Don’t Make Any Career Changes Too Quickly
While changing jobs will not affect your actual credit score, it can come back to bite you when you are applying for any future loans or lines of credit.
This is because the agencies that decide if you are approved or not will generally factor in a report that concerns your employment.
What this means for you is that the financial entity will look at the last 24 months of your employment to ensure that you’ve been working long enough in one place. And thus, you are more likely to be able to repay them.
Changing jobs at this time is like shooting yourself in the foot. So, if you have any new business aspirations, then be sure to keep your current job. Then, you can build up those businesses in your free time – you don’t want to cost yourself any credit or loans you might otherwise be entitled to!
Keep Current on Non-Bankruptcy Payments
While filing for bankruptcy will close out most of your accounts, it does not cancel out every debt that you owe. Certain debts, such as alimony or student loans, will still have open accounts and will eventually need to be settled.
It is in your best interests to do this, and we recommend paying a little more than the minimum if you can. This is going to improve your debt-to-income ratio, and your credit is going to start climbing much more quickly than if you’d ignored these debts.
Make Sure That Your Payments Are Being Reported
While you are paying off those non-bankruptcy debts, you should determine who reports such payments to the credit agencies. While companies aren’t obligated to report that you are paying, it can really help you get out of the ‘bankruptcy hole’ when they do report this information.
You can also try to have things like rent and utilities reported to the credit agencies, check to see if that is an option, and then have it done. While these payments do not always factor in on applications, every little bit helps, so take advantage of it!
Apply for New Credit to Build Your Credit Score Up
You will need to apply for new credit, but you need to be careful about this by aiming low. This is because every time you apply for new credit, a check is run, which will be noted. That means that you will look like a ‘risky proposition on paper if you apply to everyone, and we want to avoid this.
So, target some credit options that will help you and that you are more likely to get. Examples of this include the following:
- Gas cards
- Credit-builder loans
- Secured credit cards
- Credit lines with favorite retailers
These options are much easier to get than an unsecured line of credit from a major provider. Therefore, start with one or more of these options so that you can start modestly and build yourself up from there.
When You Get New Credit, Keep Your Balances Low
Once you get new credit, you are going to need to exercise your powers of restraint. This means that you will need to keep your balances low so that you don’t hurt your shiny, new credit.
The best way to do this is to pay more than the minimum to keep new debts managed and reduce the amounts you will be paying on the accrued interest.
You should also set up autopay whenever you can. Autopay makes it easy since you won’t have to micro-manage your payments to know they are being made on time.
One strategy to help yourself pay more than the minimum is setting up multiple small payments throughout the month. That way, it feels like the ‘hit’ on your paycheck is less while you are paying MORE.
Remember, those interest rates on debt are calculated against the total that you owe, so paying a little extra now saves you from paying a whole lot of interest over a more extended amount of time!
Bankruptcy Is Not the End, So Start Rebuilding Now
Today, we’ve talked about the steps you need to take after bankruptcy to rebuild your credit. Remember, you don’t want to change jobs during this time, and you are still going to have some non-bankruptcy debts – so get a payment plan started to get those settled and keep them managed.
Make sure that creditors who are willing to report your on-time and early payments are doing so and apply for new credit but be humble about it so that you don’t make yourself look like a risky spender. Then, once you get that new credit, keep up with your new debts so that these new lines of credit can build you up over time.
We won’t kid you. It’s a long road to credit redemption, but with a bit of patience and the tips we’ve shared today, you’ll get there. You can count on it!
Image credit: [Steve Stark]