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Building Your Credit After Bankruptcy

| Apr 20, 2015 | Bankruptcy

One of the reasons that many people hesitate to file for bankruptcy is that they are worried about what might happen to their financial future. Bankruptcy, however, was designed to be a fresh start rather than a punishment.

Many people are concerned about what a bankruptcy will do to their credit rating. There are certainly tactics that can be employed to improve your credit score:

  • Make a budget and stick to it. Without putting too fine a point on it, overspending is likely part of the reason you fell into debt in the first place. It is crucial to take a careful look at your income and the bills you need to pay each month. Limit your discretionary spending and focus on building a savings account.
  • Build a savings account. Resign yourself to putting a small portion of your paycheck into savings each month. This account can be used for large purchases, emergencies or even a vacation. This way, however, you have a reserve of cash rather than relying on credit cards for large purchases.
  • Use your credit cards wisely. After a bankruptcy, you will likely receive numerous credit card offers. It is wise to select a card and use it wisely. Strategies differ slightly, but you could use this card each month and then either pay all or most of it as soon as the bill comes due. In this manner, you can begin building a beneficial credit history.
  • Get a secured credit card. If you feel uncomfortable using a traditional credit card, you can explore the option of a secured credit card. Typically, these cards act like a checking account – you are only allowed to spend the amount of money you’ve added to the credit card account.

Using these steps, you can begin building your credit rating following a bankruptcy.

Source: Bankrate, “Life after bankruptcy.” Accessed 4/6/15

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