Going through a bankruptcy can feel hopeless, but in reality, the process of post-bankruptcy credit repair is anything but. While bankruptcy may seem like a humiliating experience, don’t make the mistake of letting such feelings overtake you. After all, the very act of filing for bankruptcy – declaring your desire to start over and create a better life – is an action that bespeaks an intention to get it right this time. Rebuilding credit after bankruptcy isn’t easy, but if you play your cards right, you may even have better credit than you had before things spiraled out of control.
Bankruptcy Is NOT the End
Many people associate bankruptcy with the demise of a business or a person’s financial standing. That’s simply not the case. While bankruptcy is undoubtedly a low point, it’s one from which you can improve. Your credit will never be worse than it is on the day you file for bankruptcy. It will improve as time goes on and you adjust your life to match your current financial situation.
Making Changes
Filing for bankruptcy isn’t just paperwork – it’s a major lifestyle change that will affect every other area of your life. The good news is that these changes may well carry into your post-bankruptcy life and prevent you from falling back into debt.
Life Without Credit
The most significant change you’ll have to make is living without credit — at least for a period of time. Many people fall into bankruptcy because they use credit for both essential and discretionary purchases; now, it’s likely that you’ll be prohibited from using credit for either. Such a change may force you to choose the things that really matter and to budget to afford those things. This may be extremely difficult at first, but it’s a necessary step in your recovery from bankruptcy.
Credit Monitoring
As you improve your credit, it’s important to make sure that the positive actions you’re taking are reflected on your credit report. It’s a good idea to check your credit report every month to ensure that your credit file is accurately updated. You can purchase credit monitoring services from CreditRepair.com, which will notify you if changes are made to your credit report. You’ll also get $25,000 in identity theft insurance, which can come in handy if your identity is ever stolen.
Paying on Time
Without question, the most important thing you can do to aid your credit repair after bankruptcy is to pay your remaining bills on time. Make sure that the payments for any debts that were not included in your bankruptcy – a car, a house, student loans – are never late. Though bankruptcy is the biggest black mark you can have on your credit report, a history of late payments isn’t that far behind. By keeping your payment history clean, you’ll rebuild your credit much more quickly, and over time your history of on-time payments will supersede your bankruptcy as the dominant factor in your credit score. Remember, though, that the bankruptcy-related items appearing on your credit reports may remain for a maximum of 10 years, although a targeted creditor-focused credit repair program may shorten that time frame.
After Discharge
In bankruptcy, you can’t see the forest for the trees. Adjusting to a new credit-free life is your biggest priority, and an eventual future free of credit problems seems miles away. However, getting back to good is closer than you think.
Once your bankruptcy is discharged, you can apply for new credit, but you must be very careful. Remember, just because you can get a credit card doesn’t mean you should rack up more debt. Use it a little, remembering to stay within your limits, which will likely incorporate annual fees, and pay it off in full each month. This will show creditors that you’ve learned from your mistakes and can responsibly manage credit.
You’re still living a credit-free life, but with the occasional use of a low-limit credit card for essential purchases, for the sole reason of repairing your credit. Think of your credit card as a means to an end, not to be abused.
In this way, you’ll still live a credit-free life in which no balances are carried forward. Even so, in order to repair your credit, you’ll make and repay certain essential purchases with your low-limit credit card. Think of that credit card as a means to an end, not to be abused. As you continue your credit repair, bankruptcy will move from being something that has perhaps defined you to a past mistake from which you’ve learned. In the end, you’ll be better off for your experiences – you’ll know how to successfully manage credit for the rest of your life.
