Build Credit After Bankruptcy in Simple Steps

You may not realize it, but there is life after bankruptcy-only if you know how to build credit after bankruptcy.

Rebuilding your credit is like correcting a past mistake. In your case, your bankruptcy serves as a learning experience and a wake up call for you to better manage your personal finance. For example, overspending with your credit card will teach you the value of using your card more wisely. The aftermath of bankruptcy signals a new chapter of your life-and you must start it with a clean slate. And once you do, you should be careful with your credit and maintain its good reputation. Here are some tips to help you rebuild your credit after you have come out of bankruptcy.

First, you have to make sure that your credit report is free of errors. This is because your credit score depends on the data shown in your credit report. More often than not, people who just came out of bankruptcy have credit reports that indicate open and overdue accounts, when they should have been closed as part of the bankruptcy that was filed. To correct the errors, you should contact the credit agencies and ask them to properly report your accounts as included in bankruptcy.

To rebuild your credit quickly after bankruptcy, you have two options: getting an installment loan and getting a secure credit card. That way, you will be able to prove that you are now trustworthy and that you can pay all your obligations without delay.

You may apply for mortgage loans for financing a house or car six months to two years after a bankruptcy. Once your loan is approved, see to it that you always pay on time. And if possible, try to pay more than what you owe to improve your credit score. Aside from making payments on your current loans, it is best for you to pay down your existing debts to further boost your credit.

Another way to get a good credit score is to get a secured credit card, which provides a credit limit equivalent to the amount you deposited at the issuing bank. But getting just any card will not do. You might end up paying for huge annual charges, which does not do anything to improve your credit. So choose a credit card that has low annual fee and no application fee.

Expect that you will get a meager amount for credit limit, which usually ranges from $200 to $500. Resist the urge to max out your credit card-you do not want to hurt your credit again, do you?

One strategy you can use is spending only less than 30 percent of your credit limit. Also, pay your balance in full every month. Remember, you need to keep your credit healthy. So use your credit card wisely, and you will reap the rewards sooner than you think.

How to build credit after bankruptcy? It is simple and easy: pay whatever you have to pay on time and without missing a single payment. Only then you can be sure that there is indeed life after bankruptcy.