Bankruptcy Discharge: How to rebuild your credit
Many people shy away from bankruptcy because they worry what it will do to their credit. But the truth is that continuing to struggle with debt that you cannot pay will have a much bigger negative impact on your credit. If you have struggled for a while, you likely have a lot of missed or late payments on your record, high credit balances, and a lot of credit applications. In that case, filing for bankruptcy can actually improve your credit by wiping out those balances and putting an end to your debt problem.
But you will still have to do a little work to rehab your credit, whether you file for Chapter 7 bankruptcy or Chapter 13 bankruptcy. Usually, you can expect your credit to be healthy enough to get approved for loans within two years, but if you are vigilant, you can get there a little faster. Here are a few things you can do to rebuild your credit score after your bankruptcy discharge:
CreatE a Budget & STICK to It
The first thing you’ll need to do to rebuild your financial health is to create a realistic budget. Make a list of all your expenses, and then build in a little extra for unexpected expenses or for fun things. Compare that to your income and ensure that your expenses do not exceed it. If they do, find ways to lower your expenses or raise your income so that you are always living within your means.
Then, continue to spend only within your budget. Do not use credit to buy things outside your budget. Living within your means will go a long way to ensuring that you never get into a financial situation that you can’t handle.
BUILD UP YOUR SAVINGS
You never know when a financial emergency will arise. To avoid taking on more credit and possibly having more trouble with debt. You can help to avoid this situation by building up your savings.You may find it difficult to put aside too much at first, but any little bit you can save will help.
Create a separate account to keep your savings so that you don’t feel tempted to spend it. With the right account, you can also earn a little interest, helping your savings to grow more quickly.
get a small line of credit
When you’re ready, you can apply for a small line of credit, such as through a gas credit card or store credit card. Keep this account current and pay it on time, and you’ll see your credit score rise slowly but steadily.
You can also consider getting a secured line of credit, asking someone to co-sign on a line of credit for you, or becoming an authorized user on another account. Any of these can help you get credit if you can’t get it on your own.
keep your credit balances low
Whatever kind of credit you get, use it sparingly. Keep your balances low to ensure that you are always able to pay the account and to protect your credit. Your credit score will drop if your balances are too close to your limits. Aim to keep the balances under 28 percent of the total limit.
keep credit applications at a minimum
Every time you apply for credit, there is an inquiry on your credit report. Excessive inquiries will lower your credit score. So if you apply for credit and are denied, wait a while before you apply again. Numerous applications will make it look like you are struggling financially and are turning to credit to solve your money woes.
pay all your bills on time
No matter what else you do, always pay your bills on time. Even paying your cell phone or your car insurance bill on time will help you establish a positive credit history. Paying on time will also keep your balances in check so you do not reach a point where you can no longer manage your debt.
Be consistent in your efforts to rebuild your credit, and you will slowly see your credit improve after your bankruptcy. You will be able to qualify for new lines of credit, including a home loan or a car loan. But the first step to managing your overwhelming debt and getting on that road to financial recovery should be to talk with a Gilbert bankruptcy lawyer about your options for debt relief.
Contact bankruptcy lawyers in gilbert
Call Gilbert Bankruptcy Lawyers today to learn more about how Chapter 7 bankruptcy or Chapter 13 bankruptcy could help you manage your debt. You may qualify for a total discharge of your debt, or it may be more beneficial to reorganize your debt under a repayment plan that you can actually afford. Call us in Gilbert to schedule a free consultation with a bankruptcy lawyer and learn more.