Bankruptcy doesn’t have to mean the end of a healthy credit score. You can raise your score and build good financial habits with these 5 simple tips.
1. Keep Tabs on Your Credit Score
Do you know your credit score? This score is definitely something you’ll want to keep up with on a regular basis. Your credit score lets you know where you stand. There are several credit reporting agencies, and it’s wise to request a report from each one.
Once the reports arrive, take time to read each report carefully. Look for any inaccurate information and the total amount of debt owed. Take care of any inaccurate information quickly. You can do so by reporting the errors to the credit reporting agency and opening an investigation. Make sure any debt you had prior to filing bankruptcy is properly recorded under “included in bankruptcy.”
2. Use a Secured Credit Card
A credit card after bankruptcy? It’s not always a bad idea especially if you go the way of a secured credit card. This type of credit card differs from a standard credit card in that you use your savings account as collateral and as your credit limit. You’ll also find the approval process to be easier as well.
Regardless, you will still need to keep up with payments. Always pay on time and never miss a payment. While your credit score may be low, you can raise it over time with regular payments. If you do decide to go the way of a standard credit card, ask your bank about a low-limit credit card.
3. Make Regular Payments On Time
It’s important to make regular payments on debts other than your credit card. Keep up with mortgage, car loans, and student loans. These loans will help you rebuild your credit if you are consistent.
To raise your credit score, pay ahead of time and pay more than the minimum payment. Avoid making purchases you know you won’t be able to pay off as they can lead to a snowball effect and heavy balances.
4. Take Out a Home Loan Wisely
Yes, you can purchase a home after bankruptcy. First, take time to know your options. You can most likely take out a home loan 1 to 2 years after bankruptcy. Use the time before you’re eligible for a home loan to build up your credit score and form good financial habits.
The Federal House Administration is an excellent resource. Be sure to consult their guidelines for taking out a home loan.
Be wary of any home loans that seem too good to be true. People may offer you loans with high interest rates and unfavorable terms and conditions. Work with your bank and bankruptcy lawyer to find a financial advisor who can assist you in finding a home loan.
5. Make Sure Your Bankruptcy Record is Removed
As we mentioned earlier your pre-bankruptcy debt will be recorded on your credit report as “included in bankruptcy.” This information should be wiped from your report after 7 years. How quickly the bankruptcy record is removed from your report depends on the Chapter.
Chapter 13 bankruptcy records are removed after 7 years. Chapter 7 bankruptcy records are removed after 10. These records should be removed automatically, but you’ll want to keep up with them.
If you’re dealing with bankruptcy, take steps to improve your financial future by contacting us for a free consultation.