Here’s How You Rebuild Your Credit After Bankruptcy
Bankruptcy is often the last resort for people when they have no other options left. Filing for bankruptcy can quite be quite scary and not mention how tough and costly it can be. It is true that filing for bankruptcy takes away whatever credit you had built but it is not impossible to build back your credit score. You can take the help of a bankruptcy attorney in Boulder to help you file for bankruptcy.
Once you have filed for bankruptcy, it will stay on your credit reports for 7 to 10 years but with a lot of hard work and responsible behavior you can reorganize your finances and rebuild your credit. Here are some tips to help you rebuild your credit after bankruptcy.
The type of your bankruptcy is important
- Chapter 7 bankruptcy
In the case of Chapter 7 bankruptcy, all your debts are wiped out. Your assets will be sold to pay the creditors except for basic necessities like clothes, home, car, etc. Although this type of bankruptcy clears all your debts it remains in your credit report for 10 years and the complications are more far-reached. To file for this type of bankruptcy you should earn above the median income range of your state.
This a common type of bankruptcy and pays off part or all of your debts in 3 to 5 years. This bankruptcy stays on your credit report for 7 years but you can make repayments to counter the negative hit somewhat. A bankruptcy attorney in Boulder can help you create a repayment plan that you can manage and your creditors will accept.
Plan a budget
Take the help of a credit counselor or a bankruptcy attorney to formulate a budget that consists of a spending plan, helps manage your cash flow and prevents you from taking any unnecessary debts in the future. When you have filed for bankruptcy, it is necessary for you to always stay on top of your finances and refrain from creating any future debts. Also, regularly check your credit score so that you can keep a track of your progress and improve your credit score gradually.
Consider getting a credit card again
When you are rebuilding your credit after bankruptcy, consider getting a credit card as soon as you are able to. While this may not seem like the best idea, considering your experience with debt but with responsible financial behavior, you can stay away from debts. Know that you cannot rebuild your credit without using credit.
Also, while choosing the credit card, choose the ones that suit your current requirements. Find a card that has zero to very low upfront fees, offers prequalification checks and also reports to all three credit bureaus.
Use new credit cautiously
Once you get a new credit card, use it very responsibly. Use your card to make small purchases like groceries and gas and pay off the card bills every month. This will start establishing a good payment history and eventually get your credit back on an upward trajectory. Also keep checking your free credit reports regularly, if you notice any problem on the report, get it removed immediately.
Pay the non-bankruptcy accounts on time
All accounts are not included in bankruptcy and the active accounts will impact your credit score. This is why you need to keep paying all the non-bankruptcy accounts on time. Also, if any account isn’t mentioned in your credit report, do not ignore it as this might eventually come up on your credit report.
Consider getting a co-signer
If you can have a family member or a friend co-sign with you, it will increase your chances of getting a better card and helps improve your credit score more quickly. But this is also a matter of big responsibility. If you make a late payment then it will impact the credit report of the co-signer as well. So before you convince someone to co-sign with you make sure that you will be able to keep your payment record spotless.
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