Having to file for bankruptcy is one of the most devastating financial decisions that you can have to make. People file for bankruptcy for many reasons and situations.
Where there used to be a stigma attached to filing for bankruptcy, thankfully that is no longer the case today. Many people now realize that bankruptcy is simply a financial tool which sometimes needs to be used to make someone’s live more manageable. However, just because the stigma is subsiding, the after effects of bankruptcy often linger on in the way of your credit report.
Filing for bankruptcy will totally kill your credit scores and the filing will last on your credit report for a whopping six years. However, that is basically the only two ramifications to you for filing. And, the good news is that soon after you have filed for bankruptcy, you can start to rebuild your credit and improve your scores!
One of the first things you should do after having filed for bankruptcy is to decide that you will do everything you can to avoid ever having to file again. This includes building up an emergency fund to cover unexpected expenses, and it means making a pact with yourself, and your spouse if you have one, that you will not ever let your spending or debt load get out of hand in this way again.
The second thing you should do to improve your credit post-bankruptcy is to make sure that you make any and all payments on time, each and every month. This includes paying your mortgage, car payments, and any debts which you chose to keep through the bankruptcy process. Whatever you do, do not make any late payments – for any reason at all!
In addition to these two things, you will want to approach your bank about obtaining a secured credit card. With a secured credit card you will be making a deposit in the amount of your credit line. You can used a secured credit card just as you would any other credit card, but the lender is assured of payment because if you do not make your payments they can keep the money in your savings account which is being used as collateral.
Once you have your secured credit card, you want to use it to make a purchase or two each and every month, and then make sure you pay it off each month when you receive your statement. Every month when you make your payment, the lender will be reporting your on-time payments to the credit reporting agencies. As time passes, these payments help to improve your credit scores.
It is important to note that even after bankruptcy you can still finance a vehicle or get a mortgage. However, the worse your credit scores, the higher interest rate you will pay for the loan. Sometimes when you must take on one of these bad credit or sub-prime type loans you can make the regular payments for a year or two and then refinance them for a better rate, once your credit scores have improved.
As you can see, bankruptcy is something which you can survive and even prosper after. Taking the time to rebuild your credit after your bankruptcy can insure that when you need to borrow money again, you can do it without huge costs and high interest rates.
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March 13th, 2008 at 12:47 pm
[…] Whether you are just starting out on your financial journey, or if you are starting again after a bankruptcy, there are many things which you can do to build and improve upon your credit rating. […]