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7 Guidelines to Rebuilding Your Credit After Bankruptcy

Picture demonstrating a crossroads.

The decision to declare bankruptcy is very difficult. The goal of filing bankruptcy is to give a troubled debtor a fresh start, yet it affects your future credit, your reputation, and your self-image. Thankfully it also considerably improves your short-term quality of life, it alleviates many of your financial obligations, and you may be able to obtain new lines of credit within one to three years of filing.

Life after bankruptcy is a gradual recovery process. Your credit score will rise and you’ll eventually qualify for loans again. What are the best ways to ensure you get your credit back on track? Here are 7 ways to rebuild credit and qualify for loans again in the fasted way possible.

1) Prepare a budget

Budgets show a clear picture of your spending weaknesses. They provide the structure for you to get stronger in those areas and use your income to cover your expenses. Make sure you base your income on your monthly take-home pay instead of your salary. An effective budget is likely going to involve some difficult choices – but keep in mind, these little choices will add up to something substantial and tangible, making the whole process worthwhile.

2) Make payments on time

One of the best ways to quickly repair your credit post-bankruptcy is to pay your bills on time. Paying your mortgage or rent on time and paying your car loan or lease on time will help improve your credit score and keep you from getting back in trouble with debt.

3) Prepare an emergency fund

It may seem like a big task, but you can make it happen. There are plenty of ways to quickly save up emergency fund money by increasing your income or decreasing expenses. Start by identifying habits you can break. You can start small. Some examples:

  • Stop eating at restaurants
  • Pack your lunch for work
  • Get rid of unnecessary cable tv
  • Quit smoking
  • Stop buying coffee from shops

Everything adds up. For extra income, consider selling your non-essentials or getting a second job. Other ideas include:

  • Carpooling as often as you can
  • Buying used instead of new
  • Starting a change jar

4) Get a secured credit card

Sound risky? Not if you’re careful. Get one credit card for emergencies but buy things with by cash, check or debit. If you do use the credit card, be sure to pay it off in full, on time, every month.

5) Beware of impulse purchases

We’ve all been there – you see something in a store and get a momentary thrill as you consider buying it. But since it’s not something you need or intended to buy, resist the urge. Impulse buying is hard on your wallet and prevents you from developing sound financial practices.

6) Get a copy of your credit report

Credit monitoring services can be very helpful after bankruptcy. By watching your credit score, you can track your progress to know your efforts are having the effect you want. You can obtain a copy for free at www.annualcreditreport.com. Check your credit every 6 months. You’ll be able to see when you’ve recovered enough to do bigger things, like buy a new home.

7) Be realistic

More than likely, your credit score increased post-bankruptcy because you’re a greater credit risk to lenders. If you want to purchase a home, you may have to wait at least two years post-bankruptcy discharge, but you must be realistic about what you can afford. Affordability means you can put down 15 to 20 percent without drawing down your savings, be able to finance, and not exceed 25 percent of your take-home pay.

You Can Rebuild After Bankruptcy

You may feel like you’re the last candidate lenders and credit card issuers would consider, but that’s not true. You’ll have to do a few things to prove yourself, but before you know it, your recent history will finally show you are a good credit risk. Your vigilance in restoring your credit reputation will pay off.

Our Cherry Hill Bankruptcy Lawyer Can Help You

The Law Office of Joel R. Spivack can help you deal with the aftermath of your bankruptcy. We’ll provide honest answers to your questions and let you know what we can do to make this process go as smoothly as possible.

Call 856-488-1200 or Contact Us Online to Get Your Free Consultation

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.