What is credit repair after bankruptcy? It is something that comes out of your minds when we want to reestablish your credit after filing for bankruptcy. In order to financially get back on track we will need to have self-discipline, commitment and persistence because rebuilding credit do take time.
Before repairing credit let’s learn creditworthiness concept first. Credit worthiness represents your financial reputation among creditors and it is determined by your credit history. You can get any credit on favorable terms if you’re creditworthy persons. Are you used to fail to pay off your credit card debt or missing a payment or more? Here are some steps to improve your credit.
Repairing Your Credit Report
The first step you will need to take is repair your credit report. Get a copy of your credit report from the 3 major credit reporting agencies. Then check for any mistakes on the following information: the amounts and locations of your bank accounts, charge accounts, loans, defaults, bankruptcies, foreclosures and lawsuits.
If you find any inaccuracies on your report, like a wrong address or credit payment, contact the reporting agency. They should remove the error if they fail to verify the information within 30 days. You cannot, however, do anything about any unfavorable information like bankruptcy filing — it will stay there for the next 7 years for Chapter 13 or 10 years for Chapter 7.
Applying for a Secured Credit Card
The next credit repair after bankruptcy step is to secure new lines of credit. The purpose of this is to show creditors how you have improved in terms of meeting financial dues. But apply only for a new credit card where there is a big chance of you getting approved.
You can start rebuilding credit by applying for a secured credit card, preferably a card without annual fees attached to them. Here you deposit cash in a savings account as collateral and the amount of which will be your credit line. Even though you can charge up to the amount of your cash deposit, use it only for small purchases to keep the credit limit low and you will be easy to pay them off every month.
Make sure you pay your monthly payments in the full amount and on time because prompt payments made in a full amount will impress your creditors.
Improving Your Debt Management
Becoming creditworthy again is important. When you apply for credit after bankruptcy, lenders will be more concerned about how well you have managed your loans. Prompt payments on all your debts, including that were not discharged, can convince lenders. In two years, you’ll be able to get better terms on new lines of credit.
Remember to develop a new spending habit, though. Before getting a loan, ask yourself whether it is necessary and if so, whether you afford to pay it back. Additionally, build the habit of saving money so that you can set aside as much as you can afford every month to cover you should you experience any major set back.
Overall, although the goal of credit repair after bankruptcy is to qualify for credit should you need it but what is more important for you is to prevent yourself from incurring too much debt again in the future.