How to Rebuild Your Credit after Bankruptcy
People who file for bankruptcy often hear many myths about their financial future. You may have heard you will not be able to get a mortgage for ten years. Someone might have told you bankruptcy forever tarnishes your credit score. You may believe you will never be approved for a credit card again.
The truth is you can start rebuilding your credit directly after filing. First, check your FICO score by using a free annual credit report service. Then, follow a few tips to help renew your credit score:
Budgeting means living within your means, setting aside a reasonable amount for savings. See how much you need for each monthly bill. Remember to factor in any loans or bills that were not wiped away in the bankruptcy. Then, plan how much to spend each week on groceries, transportation and additional living expenses.
Apply for a Secured Credit Card
Secured credit cards work similarly to a debit card, except they help you to build credit. The card requires a cash collateral deposit that becomes the credit line for that account. If you put down $500, you can charge up to $500 on that card. Financial institutions are much more likely to approve recent bankruptcy filers for a secured rather than an unsecured credit card.
Pay Current Obligations
Chapter 7 bankruptcy relieves you of many types of debt. However, student loans, back child support and mortgage payments are unlikely to be eliminated. Or, if you filed for Chapter 13, you have a monthly payment to make to all your creditors. To improve your credit score, stay current on all future obligations. An Orange County bankruptcy law firm helps you lay out a reasonable payment plan that makes sense for your financial situation.
Yes, after bankruptcy, your FICO score will take a huge hit – sometimes as much as 200 points – and the healing process takes time. However, if you make some changes to your spending and saving habits right away, you can start rebuilding your credit immediately. Contact a bankruptcy lawyer in Orange County for more information.