What do you do after filing bankruptcy? You, Press on Regardless! But sometimes you need credit to keep going. While a bankruptcy makes it harder to be approved for loans, it’s not impossible. Especially if you are disciplined and remember that your goal is to rebuild your credit reputation, not accumulate new debt.
What are some of the steps to rebuilding your credit?
First, consider starting with a credit builder loan, sometimes called a “fresh start” loan, with the only purpose of improving your credit score. You get approved for the “credit builder loan,” typically $1,000. Still, the credit union or other institution does not give you the loan money. Instead, you make “installment payments” on the “loan” as the installments come due each month by making deposits. The lender reports the installment payments as payments on a loan, even though your payments go into a savings account. The lender, in exchange, receives interest over the term of the loan. Still, in the end, after you make all the payments, you get back the $1,000, or another amount you agreed to. As long as you make all of the installment payments on time, avoiding late fees, this is a great way to reestablish your credit reputation.
Second, open a secured credit card, which requires a deposit of anywhere from $200 to $500 (the higher you can deposit, the better). Then, make small purchases on the secured card that you can quickly repay, such as a tank of gas, or lunch at a fast-food restaurant. So long as you repay speedily and never get a late charge, you will build your credit history the same as paying on a regular credit card.
Third, take out a small $500 loan with a credit union, but don’t spend the money. Use the loan proceeds to repay the loan within a month or two, letting the lender report your on-time payments to the credit bureaus. Do this a few times a year to rebuild your credit history.
Fourth, after doing the above over time, apply for a credit union Visa or Mastercard, with a small credit limit, to replace your secured credit card. Again, charge small amounts, like a single tank of gas, or lunch at a fast-food restaurant, and repay the price quickly and always on time, never late. Remember, the idea is to rebuild your credit reputation, not accumulate new debt.
The best thing to remember is to build a healthy savings account to handle emergencies and work up to larger purchases paying cash whenever practical. The second thing to remember is always paying your bills on time to avoid late charges and damaging your attempts at rebuilding your credit history and reputation. Eventually, your credit score and excellent payment history will help you qualify, if needed, for bigger and lower interest loans such as for cars and mortgages.
If you are experiencing debt problems and are considering bankruptcy, please call 813-308-9045 today to schedule a free initial consultation. As always, Press on Regardless!
