After filing bankruptcy and getting over the pressure and demands by creditors, you need to think of how to begin rebuilding the credit. At the start, it will be difficult to access credit but it will not be impossible. Bankruptcy on the credit record makes you subprime borrower and thus you pay more for credit. As a subprime borrower you are considered to be greater risk and you will pay higher rates of interest and penalties if you default. After filing the bankruptcy, your debt to income ratio reduces drastically. In most states and countries of the countries, there are various bankruptcy statuses so you need to consult an attorney or other expert to guide on how best to go about declaring your bankruptcy. The following is expert guide on how to rebuild credit after bankruptcy.
- Avoid getting credit too soon after bankruptcy:
Most experts advise that after declaring bankruptcy, you should avoid borrowing money too soon. Instead, you should put in place measures of making payments every month so as to establish credit and be able to get the loans on terms that are more favourable.
- Keep and maintain emergency reserve:
In the bankruptcy status, you are can easily save because you will have eliminated your debt and you can plan for your financial future. Experts advise in this regard that you can save a portion of your income, such as 10%, or some minimum you can comfortably manage. You may save pennies or even the change if your budget cannot allow saving due to paying off debt.
- Avoid payday loans and other predatory lending scams:
When you declare bankruptcy, you should be very careful and wary of anything that you do as it will help improve your credit score after bankruptcy or worsen it. There are some predatory lenders out there who are looking for the credit-impaired consumers such as those who have declared bankruptcy, and they charge then very high fees whenever they want to borrow money. The payday loans allow consumers to postdate checks for the loan amount and the fees needed for taking out that loan. These loans are usually granted at very high fees. With payday loan, you may pay as high as 400% interest. Avoid these if you want to rebuild credit after bankruptcy.
- Examine credit report:
As a way of rebuilding credit after bankruptcy, take your credit report and have it examined by an expert for inaccurate or missing information, and errors. Incorrect personal contact information, employment status, current residence and such other details may worsen the credit rating. Ensure it is corrected to reflect your true state of affairs.
- Credit cards:
You should be careful with use of credit cards after bankruptcy as they can have both positive and negative effects. Experts advise in this regard that you should open credit card which is secured, immediately after being discharged from bankruptcy status. Ensure you go to bank, fill out that application then deposit money in to that secured account. In turn, the bank will provide credit card and credit line which ranges between 50% and 100% of that deposit.