Have you recently used bankruptcy to get your finances back on track after being over your head in debt? You may not know how to fix the blemished credit history that you now have due to bankruptcy. However, your credit is not blemished forever. You can help it recover with these tips.
Have Your Credit Checked
You will want to check your personal credit score after going through bankruptcy to verify that all of the known debts have been discharged. Some people make the mistake of assuming that their credit history has been cleared only to later discover problems. You will need to address any debts that are still on the credit report and have the creditor remove them.
In addition, you may have discovered a debt that you completely forgot about during your bankruptcy filing. Bankruptcy doesn't automatically find the debts for you; debts will only be discharged if you remember to list them. It is a good idea to look at your credit report to make sure no new debts pop up. If a debt does show up, take care of it immediately.
Open New Credit Cards
Your gut reaction after finishing bankruptcy may be to close your credit card accounts and never charge anything again. While a lack of self-control with credit cards is a reason some people go into debt, credit cards can also be used to build your credit back up.
Consider opening some new credit accounts that you will use only rarely. Since you still have a bankruptcy on your credit report, you will most likely get offers with very low credit limits and very high interest rates. Be aware that you may have to get a secured credit card after bankruptcy, meaning that you will leave a deposit matching your credit limit. The deposit gives the credit issuer insurance in case you don’t pay your bill.
Your credit utilization rate is key to building up your credit, since you want to show that you are using only between 10 percent and 20 percent of your available credit. This purchasing behavior demonstrates that you have self-control and will not charge your credit cards to the max. Paying off your statement in full each month shows that you can repay debt.
Use Loans or Financing
While you may not be eager to start borrowing money again after bankruptcy, you do need to build up your credit. One way to do this is by using a loan or financing. By paying money you owe on time, you can show you’re fiscally responsible, and you will eventually be able to afford bigger purchases.
A bank might not be eager to approve you for a loan right after bankruptcy, but the business you are working with may offer financing. For instance, a small loan for a used vehicle can help push your credit score in the right direction.
Be an Authorized Credit User on Someone's Credit Card
Do you have a trustworthy family member who is responsible with their credit card? This means low utilization and consistent payment of the entire balance each month. If you do have a relative like this, ask whether he or she will add you as an additional cardholder on the account.
You do not need to use the credit card to see having your name on the account impact your credit score in a positive way. All you need to do is allow the card to stay active while your trustworthy friend or family member continues to make purchases and pay off the card in full. This activity will reflect on your own credit score, since the account you are a part of shows responsible borrowing activity.