Rebuilding Credit after Bankruptcy

Applying for bankruptcy is an extremely responsible action. Whatever the cause, starting over from scratch is better than being caught in a cycle of debt. It is perfectly natural to experience a sense of relief after filing for bankruptcy. Rebuilding your debt is a slow process, but it does not have to be a stressful one.

1. If you are attempting to change your financial situation, you must adjust your attitude toward money. Think about everything that led to bankruptcy in the first place. Was there anything you could have done differently? Are there any old spending habits that you need to adjust?

Most of the time, people who are in debt develop a short-term attitude. Everything begins to revolve around paying this month`s bills and doing whatever it takes to make ends meet this month. This is something that we all resort to in a time of crisis or desperation, hence the common advice that one should “take things one day at a time”.

With finances, expenses and profits accumulate over a long period of time. Mortgages are usually paid off over thirty years. Investors consider it a success to turn over investment profits a year or two after initial expenses.

To stay out of debt, you must select loans, credit cards and a mortgage based on the long term. Actions like borrowing money from a cash advanced company might benefit you today but will hurt you a week from now. Always think about the big picture before making a financial decision.

2. Check your credit report. Just after filing for bankruptcy, some inaccuracies are likely to show up on your report, which will prevent you from building credit. Usually, these inaccuracies are a leftover from before you filed for bankruptcy. Keep copies of your bankruptcy documents in case you need evidence to prove that there are inaccuracies on your report. You filed for bankruptcy to get a fresh start, so make sure that nothing from your past is lingering or bringing you down.

3. Pay all of your bills early or on time. Even if you are hesitant to apply for a new credit card or to take out a loan, you can build credit by avoiding late fees. Most banks and companies offer automatic bill pay, so if this is a viable option for you, you should take advantage of it. Life gets busy, so you never know when paying a bill is going to slip your mind. Setting up automatic payments will help you feel less stressed and will prevent you from making late payments.

4. Start building up a savings account. Put aside a small percentage of what you make every time you get a paycheck. Having a savings account will provide you with a financial cushion in case you end up with insufficient funds one month or have a family emergency.

5. Apply for a credit card. This may sound scary since credit card abuse can lead to bankruptcy, but credit cards are the fastest way to earn credit. As long as you only make small purchases and pay off your balance every single month, credit cards will only help your credit. Compare the rates and benefits of various credit cards on to make sure you are getting the best deal possible.