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Getting Credit after Bankruptcy


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TERMINOLOGY

Getting credit after bankruptcy may seem like an impossible task. Bankruptcy is devastating to your credit, but it does not last forever. If you are coming out of bankruptcy, there is good news in being able to get credit. Depending on how your bankruptcy was structured and the terms made with your creditors, it may be easier than you thought. There are steps that can be taken to rebuild your credit; however, the process will require discipline and patience.

Credit Report

The first step in rebuilding your credit is reviewing your credit report. A credit report is a detailed history of all your credit. It is important to review your credit report for accuracy. If your report is showing as open and delinquent accounts that were actually included in your bankruptcy, you will need to contact the credit bureau to have it reflect your situation correctly. Any other errors that you find to be inaccurate or that you need to dispute need to be reported to the credit bureau as well. Remember, your credit report is a history of your spending and how well you handle credit. It is also what most companies look at to determine your creditworthiness. Cleaning your report helps improve your credit standing.

Start Small

The second step in rebuilding your credit is starting small. Most people coming out of bankruptcy will not qualify for unsecured credit cards. Some bankruptcies are structured in such a way that your credit card holder will allow you to reactivate your credit with them after the bankruptcy. If this was not an option available for you, apply for a secured credit card. Secured credit cards help you rebuild your credit by issuing credit only at the amount you deposit. If you deposit $300 on your credit card, then that is your limit. Secured credit cards help you learn discipline in managing your credit since it is your money being used. When selecting a secured card, look for one that does not have an application fee, will convert to an unsecured card after a certain period and reports to all credit bureaus.

Installment Loans

The third step in rebuilding your credit is to obtain an installment loan. Installment loans help to rebuild credit because the terms specify a specific amount and time frame. Making payments on time and paying more than required helps improve your credit score as you pay down the amount owed. Some installment loans that help to rebuild credit are school and auto loans. Be aware, however, that due to your existing credit situation, the interest rates will be high.

Results

Rebuilding your credit after a bankruptcy can be challenging but worth it. The main obstacle to rebuilding your credit is to learn financial discipline. Do not overextend yourself in acquiring credit. Remember what your past spending habits were and where they got you. Bankruptcy is an opportunity to start over with a clean slate. You will sacrifice in the beginning by having higher interest rates and fees to pay, but once you have established financial responsibility, the effort will have been well worth it.