You’ve filed bankruptcy and eradicated the debt that’s been hanging over you for months or years. Now it’s time to start planning for the future. While bankruptcy does offer the chance for a fresh start, it also causes an immediate hit to your credit score. With time and careful management of your resources, you can help your credit bounce back.
1. Secured Credit Cards
Some people have difficulty finding lending opportunities after bankruptcy. Creditors may be unwilling to take a chance on someone with a recent bankruptcy on their record. A secured credit card could be the solution. When you get approved for a secured credit card, you make a cash deposit to the lender. The deposit is typically the same amount as your credit limit. You get your deposit returned after making on-time payments for a set amount of time. Secured cards often have high-interest rates, so use them as a credit-building tool and keep a low balance.
2. Make All Payments on Time
Whether you have new credit accounts or accounts that weren’t discharged in bankruptcy, it is essential to make every single payment on time. Many people have student loans that aren’t discharged—these provide an excellent opportunity to rebuild your credit score. To avoid late payments that can negatively impact your credit score or incur late fees, consider setting up an automatic bill payment.
3. Keep a Low Balance on Any Existing Credit Accounts
If you get a store credit card or secured credit card, keep your balance low. Using more than 30% of your available credit can lower your credit score, so always keep your balance below this threshold.
4. Recognize the Habits That Led to Bankruptcy
While it can be difficult to think about your spending and borrowing habits, it’s an important step in rebuilding your credit and avoiding future issues with debt. Since you typically need to use credit to build your credit score, be extra vigilant about your use of credit cards or other types of debt. If you notice your balance creeping up each month, think carefully about how you’re using your credit and whether you’re setting yourself up for financial success.
5. Build an Emergency Fund
For those who file bankruptcy because of unexpected bills and expenses, building an emergency fund is crucial. It can help you pay for a car repair or cover an unexpected medical bill without having to rely on credit.Following bankruptcy, you have the opportunity to create new financial habits and beliefs that serve you and your family. As you get started with the bankruptcy process, turn to the team at Blossom Law. Schedule your consultation by calling us at 704-271-9078.