Lawyers like Philladelphia Cibik Law, P.C. have had cases where many people struggling to pay off high credit card debt, medical bills, or other loans simply discard bankruptcy as an option. They believe that if they file for bankruptcy they will never be able to get another loan or credit card again. Every bank must be sure that before suggesting to file for bankruptcy, they should all other available options like discharging student loans which would help the struggling people to hope that things will get better even without filing for bankruptcy.
But this is a misnomer. Consumers can start rebuilding their credit immediately after their bankruptcy is discharged. In some cases, many will even qualify for a mortgage loan as soon as a year after discharge.
Following a handful of steps can help filers quickly rebuilt their credit and get back on a solid financial footing.
Top 5 ways to rebuild credit after bankruptcy
1. Obtain copies of credit reports: After a bankruptcy is discharged, it’s important to obtain credit reports from all three bureaus. Make sure that all of the information listed is correct and that there are no remaining balances on any credit cards or loans that have been discharged in the bankruptcy.
2. Determine a budget: Figuring out a budget may not have been something done in the past, but now it’s essential if you want to Save A Lot. Add up all monthly expenses and subtract them from monthly income. It’s vital to be realistic about what is spent on gas, groceries, and other miscellaneous items. Creating a budget will determine how much money is left over at the end of the month to devote to helping rebuild credit.
3. Open a saving account: When the money left over each month is established, consider putting some of it aside into a savings account-even if it’s just a small amount. Building up a cushion to pay for unexpected expenses like home or car repairs can mitigate the need to take out another loan. In many cases, automatic transfers can be set up.
4. Obtain a secured credit card: A secured credit card is one way to re-establish credit post-bankruptcy. With a secured credit card and creditor’s rights during a repossession, a deposit is made with a bank in exchange for a line of credit. The card can then be used like a regular credit card and any activity will be reported by the bank to all three credit bureaus. Eventually, once credit worthiness is established, the bank may issue an unsecured card.
5. Pay credit card bills on time: When an unsecured credit card is issued or taken out post-bankruptcy, it’s more important now than ever to make monthly payments on time because it will boost a credit score. And, paying off the entire balance every month is even better. It sends a positive message to the credit bureaus that a person isn’t taking on more debt than he or she can afford to pay off.