Building Credit After Bankruptcy
Begin to restore a credit rating by changing bad financial habits, applying for new lines of credit, and always making credit card payments promptly.
Those who go through bankruptcy must rebuild their lives, finances and their credit history. The key to restoring your credit rating is to gradually obtain and maintain new lines of credit. Making payments on time to build a good payment history will, over time, restore your credit rating.
Cash or Credit
While living on a cash-only basis will prevent you from going into debt, it will also keep you from obtaining a loan to buy such big-ticket items as a car or a home. Therefore, do not avoid credit, but change your spending habits so you don't spend more than you can afford.
Your credit report may show old accounts that are open and overdue even though they were nullified by the bankruptcy. Call the creditors and make sure the information being reported to the credit-reporting agencies is up-to-date and accurate.
Everyone is entitled by law to a free copy of his credit report once every 12 months. Obtain a copy of your report from Equifax, TransUnion or Experian and see what needs to be corrected.
Apply for New Credit
After a bankruptcy it may be difficult to get approved for credit, so start with a secured credit card. A secured card is backed by your checking account and your credit limit will not exceed what is in the account. Account activity is reported to the credit-reporting agencies, allowing you to build a record of timely payments.
After using a secured credit card for several months, apply for an unsecured card. Don't expect to be approved for a high credit limit. Your credit limit will increase as you build a good payment record. You can graduate to other credit lines once your credit score has increased.
The key to success is never charging more than you can afford and paying off your balances each month.