Bankruptcy Doesn’t Have to Be the End of Your Credit Life

After your bankruptcy has finally been discharged the courts and you have your discharge papers in hand, what next? How do you begin to rebuild your credit? The first thing to remember is what led you to your bankruptcy to begin with. You don't certainly don't want to end up in the same financial situation again. The next step is to begin to rebuild your credit, but where do you start?

Credit Report

Order your credit report from the three credit bureaus (TransUnion, Equifax and Experian) to learn exactly what's on your credit report and why. You will need to order a report from each as they don't always contain the same information. The Fair Credit Reporting Act guarantees every consumer the right to one free credit report from each of the three credit reporting agencies, every year. You can order yours at http://www.annualcreditreport.com/ These free reports won't include a credit score however, for those you will have to pay, about $8 for just your score or $16 for a full report with your score. When a person requests his or her credit report, it is listed as a "soft inquiry" and doesn't count against your score.

To begin you have to be educated about your credit rating. Your rating may be low, but don't despair, knowing is much better than being misinformed. If you never monitor your credit report, you'll never know what's there, and believe me; you need to know if there is information that doesn't belong, information that could be bringing down your score. You have the right to have anything that is incorrect reinvestigated and removed. That's the first step, get your credit reports cleaned up so that they reflect accurate information. Once again this is a right afforded by The Fair Credit Reporting Act. You can find specific information on these rights, and instructions on how to take advantage of them, as well as a sample dispute letter in my new book, "The Insider's Secrets". You'll find ordering information, other helpful articles and links on our website, The Insider's Secrets.

Pay Your Bills

Many people might think, "I've got a bankruptcy, my credits ruined and it doesn't matter." This isn't true, it does matter. Rebuilding your credit after bankruptcy is not all that difficult and you may be able to do it faster than you may think. There are lenders out there that specialize in this credit niche. But you must pay your bills, all your bills, on time, all the time. Don't take on any obligations or debt that you cannot repay based on the terms you agreed to. This is the first step to rebuilding your credit.

Applying For Credit

You should never apply for any credit that you don't really need, that's especially true now. Don't go around haphazardly applying for loans or credit just to get a signup prize or too add one more credit card to your wallet. Every inquiry to your credit report, except for those "soft inquiries" we mentioned earlier, will lower your credit score even further. That's the last thing you need right now.

Remember, applying for a loan at one place may generate many inquiries. Many businesses will submit your credit application to many different lenders generating additional and unnecessary inquiries. Each one lowering your score.

Get A Credit Card

What do you mean get a credit card? That's what got me into this mess in the first place. Not true, you got yourself into this mess and not the credit card. It maybe the fact that you misused it, or had an unfortunate situation, but it wasn't the card itself. There are many types of cards and you will qualify for more than a few. What is the best credit card after bankruptcy? At this point it will most likely be a secured card but that's ok.

You need to begin to get some positive information on your credit report. If you want to rebuild your credit after a bankruptcy, get a credit card even if you are required to secure it with savings. Getting this card isn't so you can go on a spending spree. Remember how you got here. Use your new card conservatively and pay of the balance at the end of each billing cycle. If you can't do that don't use it.

Get a Car Loan

You've got to be joking? First a credit card now a car loan? If you want to rebuild your credit you can do it. You have to get as much positive information on your credit report as you can. Get a car loan. You may need to save up a little money to use for a down payment but you will qualify for a car loan with many lenders, right after your discharge. Of course there will be other factors involved, like employment, debt-to-income ratio and your ability to repay your new debt.

Remember the part about paying your bills on time all the time. Start small; get something you are certain you can afford to make the payments on. Do not go to a buy here pay here dealer. They generally don't report to the bureaus. There are dealers that use lenders that specialize in making loans to people with less than perfect credit. Some even offer guaranteed approval. Find one and buy a car you can afford. Be up front with the dealer about your situation, this will make buying a car a lot easier in the long run. Make certain that the lender they use reports to the bureaus.
Don't worry about the rate; it's going to be high. Probably the state usury maximum but your timely payments will reflect positively on your credit report. If you can make extra payments go ahead and do it. You don't have to marry this loan; you just have to date it for awhile. You should be able to refinance after a year's worth of timely payments. Pay your car of early if you can. Then, and only then trade it in and do it again. Follow these steps and you're well on your way to reestablishing yourself.

Summary

Filing Chapter 7 or 13 is not the end of the world, it only seems like it. You can recover but you must be patient. You didn't get here overnight and you can't fix it overnight. If you follow these steps you will be on your way. I've seen consumers with a one or two year old discharge achieve a score of 700 and above. I've also seen people right back in the situation of needing to file bankruptcy again, in the same amount of time. It will take some effort on your part and a little time to rebuild your credit after a bankruptcy, but it can be done, and more easily than you might think. Be careful, be practical and you will find yourself back in the credit game in no time at all.

You can find more help with "understanding your credit and credit scores" in our new book, The Insider's Secrets.

You will find ordering information for The Insider's Secrets and our other products and services, as well as helpful articles and links to many websites at http://www.theinsiderssecrets.net/