When a person finally resolves to file for bankruptcy, it can be quite an emotional journey. Some feel anxiety about the future; others find a long-deserved sense of relief. Whatever the emotions, one question typically hangs over people: How do I restore my credit after this? The answer is pretty straightforward. Time and good decisions are the only true ways to improve credit, whether after a bankruptcy or not. Still, there are a few very simple things you can do to speed up the process and get started on the road to recovery.
#1: Obtain new credit
Most creditors are reluctant to give credit to those who have filed for bankruptcy protection within the last year. This, however, is not an absolute rule. In fact, there are plenty of creditors who are happy to give you a credit card, even a few months after your bankruptcy discharge. You will probably pay a lot higher interest rate for credit cards. Car loans will be harder to find too. But do not let this discourage you. One surefire way to get new credit is to open a small credit card with a low credit limit. You want to keep the credit limit low enough that you are sure to be able to pay it. Use the card off and on for small purchases and pay it off in full every month. This will rapidly improve your credit.
#2: Build a safety net
One of the primary reasons people go into debt and become overwhelmed is they suffer a major life event, such as a costly medical expense, birth of a child, death in the family, or job loss. These events take a happy and comfortable family to financial troubles in a flash. When there are insufficient reserves available to cover expenses, credit becomes the solution. By saving up three months of replacement income, you can do a lot to prevent problems. Imagine that flat tire, medical deductible, or worse yet, a whole month out of work. If you have sufficient savings, you do not need to rely on credit cards to pay the bills. Experts agree that even putting together just $1,000 as a “rainy day” fund can help avoid future credit problems.
#3: Borrow your own money
As obvious as it might sound, banks are pretty open to lending money when they have a guarantee that they will not lose money on the deal. People seem to think their poor credit score will keep them from ever being able to get a loan again. But when it comes to secured loans, banks are far less concerned about your credit score. This option requires some cash reserves, but it works very nicely. All you have to do is open a savings account, put whatever you can spare in the account, then request either a credit card secured against the account or a loan secured against it. There are some great options out there, and credit is rarely even considered.
Whatever you do, the single most important step in rebuilding your credit is to take on new debt slowly and carefully, always considering whether you can easily pay it off if something should happen to you. Since most bankruptcies are caused by major life events like divorce, health problems, or job loss, make sure that you have ample savings and cash reserves to protect you against these events should they occur in the future. If you are struggling financially and considering a bankruptcy, consult Florida bankruptcy lawyer Amy E. Goodblatt who can help make the tough decisions and get you on the road to recovery.
Our attorneys, Amy E. Goodblatt and Tatiana Leo, have more than 55 years of combined legal experience. They are directly involved in each case and stay focused on the issues that matter most to you.
