How to Repair Credit After Bankruptcy?
Bankruptcy is not good, especially for your credit report. It can feel like there's no way out, and the future is bleak. But Bankruptcy is not permanent, and there is hope. In fact, with some hard work and dedication, you can rebuild your credit score and get back on track.
This blog post will outline how to repair credit after bankruptcy so you can start living a debt-free life again. Keep reading for helpful tips.
Ensure Accuracy In Your Credit Report
Many of us don’t like to see bankruptcy in credit reports. However, the fact is, it will be better than the outstanding and delinquent amount. However, your credit report should represent zero balance for all the creditors and accounts already discharged via bankruptcy.
Furthermore, some creditors continue to report negative points and account details after your bankruptcy which can be damaging. Hence you need to check your credit report frequently.
Make Payments on Time
Remember, your bankruptcy does not have all of your accounts, and you cannot discharge some loans. However, all active accounts in your report will affect your score. Hence ensure that your payments are down and pay any existing loans timely.
Besides, never overlook the accounts mentioned on your credit report, as your creditors can report them, especially if you don’t pay your bills on time.
Get New Credit
Trying to obtain new credit after bankruptcy can feel like getting a loan from the Mafia: it's nearly impossible, and even if you manage it, you'll probably end up paying through the nose. But rebuilding your credit is one of the critical steps to post-bankruptcy recovery, so it's worth the effort. Luckily, there are some options for those who have recently gone through bankruptcy.
You need to know that retail and gas cards have lower qualification standards compared to the others. So, if you are unable to get traditional cards, try to avail a secured loan. In a secured loan, you will have to submit a security deposit, but the issuers will let you avail an unsecured loan if you commit to pay timely for up to one year. However, unsecured loans and cards usually have strict restrictions and higher interest. But they allow you to improve your credit if you pay timely.
Have You Heard About a Co-Signer?
Do you know if your family member or friend co-signs with you, it means you can get better loans and improve your credit even after bankruptcy?
If you can find any co-signer, you will have to maintain a spotless payment record to move ahead, and this will not be solely for your benefit. If you pay late or miss your payments, it will affect your and your co-signer’s credit.
Try Not to Change Your Job
It's no secret that lenders want to lend to those who are likely to repay their loans timely. If you've frequently been changing jobs, it will be a red flag for lenders.
After all, if you can't stick with one job, how can they expect you to stick to your loan repayments? Of course, there are always exceptions to the rule, and there may be perfectly good reasons for why you've been changing jobs so frequently.
But generally speaking, if you want to improve your chances of being approved for a loan, staying at one job for at least two years is best. Otherwise, you might end up being seen as a high-risk borrower.
Keep Your Balances Low
If you are working to achieve a healthy credit score, keeping your credit card balances low but not too low is vital. Aim for a balance that's under 30% of your total credit limit or less - the lower, the better. But DO NOT PAY IT OFF ENTIRELY. If you can maintain your balances between 1-9%, you'll look even better on your credit report.
Of course, this is not that simple when recovering from bankruptcy and wanting to improve your credit score. But if you're disciplined about making only small purchases and paying off your balance each month, you should be able to keep your balances low and improve your credit score in no time.
Apply for New Credit Cautiously
Your overall credit score also depends on how many new credit applications you make—hence no need to apply for multiple loans and credit cards, particularly after bankruptcy. The new loan applications will alert the lenders, and they might feel that you are too desperate for new credit. We recommend paying off your current loans and trying to get new ones after six months.
