Bankruptcy

Bankruptcy offers a fresh start for people whose financial troubles have gotten the best of them, but it is not a magic wand. While filing for bankruptcy wipes away debt, it still leaves you with a seriously damaged credit rating. The good news is that the moment you eliminate your debt, taking the right steps can help you to recover and rebuild your economic status and future. The secret to success lies in having a plan, sticking to it, and avoiding the pitfalls that caused your troubles in the first place.

The reality of filing for bankruptcy is that the bankruptcy itself will remain on your credit report for a decade. That being said, the sooner you replace the negative information that was the root of the bankruptcy with evidence of better habits, the faster your financial recovery will be.

Rebuilding your credit starts with demonstrating that you can be trusted to pay debts, and one of the best ways to do that is to take our credit-building loans or credit cards and paying each bill in a timely way.

If applying for a new credit card or loan sounds dangerous to you – it can be. You should start by taking a realistic look at your income and expenses and making a budget that shows you how to avoid spending beyond your means. Working with a credit counseling agency can be of tremendous value if you aren’t confident in your own abilities.

Some types of credit cards or loans are smarter than others. A secured loan is one of your smartest options, as it only allows you to borrow against money that you already have as an asset. Other loans will place the asset you borrow into a savings account that you can only access when you’ve paid the most recent bill. The thing that makes these choices particularly appealing is that they report on your positive progress to credit bureaus, helping you rebuild your financial reputation. Secured credit cards are also issued based on a prepaid deposit. These cards limit the amount that you can spend, but still generate a report that works to rebuild your credit score.

Other options for rebuilding credit include applying for a credit card or loan with a co-signer who has a good credit history or asking to be an authorized user on their card if their card company reports authorized users’ activity to credit bureaus.

The most important thing you can do to rebuild your credit score after a bankruptcy is to be diligent about making payments on time and in full. For more information about the intricacies of bankruptcy, contact us today.

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