Tuesday, May 14, 2024
HomeMust ReadHow Do You Rebuild Credit After Bankruptcy

How Do You Rebuild Credit After Bankruptcy

Can You Get Credit After Bankruptcy

How to Rebuild Your Credit After Bankruptcy

Although it may be harder to find a lender willing to offer you a competitive product, there are still ways to get credit after bankruptcy. Some types of credit you could receive include:

  • Car financing. Chern says that its possible for a Chapter 7 debtor to finance a car the day after filing. Additionally, a Chapter 13 debtor may be able to finance a car while the repayment plan is still in effect, although the trustees permission is required after showing that the car is necessary to complete the debt repayment.
  • Conventional mortgage. Most experts say that it will take 18 to 24 months before a consumer with re-established good credit can secure a mortgage loan after personal bankruptcy discharge. Credit-impaired borrowers should prepare to pay interest rates that are 2 points to 3 points over conventional rates.
  • FHA-insured mortgage. Chapter 13 filers can get an FHA-insured mortgage if theyve made timely payments for one year and the debtor has received the courts permission. Debtors with a Chapter 7 bankruptcy discharge must wait at least two years after discharge and establish a history of good credit.

What To Do After You Receive Your Credit Card

The tips below can help you to manage your credit card responsibly after youve been approved for a credit card:

  • Make your repayments on time. Youll need to make all of your payments on time to build your credit score. It can help to set up automatic payments from your bank account or set up a monthly reminder on your phone to make sure you dont miss a payment.
  • Pay your card in full each month. You can save money on interest and avoid your balance getting too big if you simply pay the amount you owe off every month. This can help you rebuild your credit and make sure you dont get sucked into another cycle of debt thats difficult to get out of.
  • Avoid using your card for cash advances. Try not to take out cash advances using your credit card since these often come with higher interest rates and can be difficult to pay off. If you need emergency cash, you may be better off looking into a bad credit loan .
  • Keep your card balance below 30% of your credit limit. Spend only a portion of your allowable credit limit each month to show the credit bureaus that youre in control of your spending. This can help to increase your credit score as well.
  • Dont pay your credit card off with borrowed money. Avoid paying down your credit card debt with other forms of debt such as payday loans or cash advances from other credit cards. This is because your interest payments can quickly get out of hand, leading you to spiral into more unmanageable debt.

Comparing The Best Credit Cards After Bankruptcy: Refundable Deposit

All three cards require a refundable security deposit.

Capital One Platinum Secured Credit Card $49, $99 or $200, refundable
OpenSky® Secured Visa® Credit Card Starting at $200, refundable

For the Discover it® Secured Credit Card and the OpenSky® Secured Visa® Credit Card, this refundable security deposit also doubles as your line of credit.

For the Capital One Platinum Secured Credit Card, regardless of which deposit you choose, your credit line will start at $200. You’ll also get the option to raise your starting credit limit by paying a higher deposit, up to $1,000.

It’s important to note that the primary goal of these credit cards is to help consumers build or rebuild credit by encouraging responsible spending and repayment habits. After each card’s designated timeframe of paying off your debt in full and on time, you can receive your security deposit back and graduate to an unsecured credit card.

Also Check: Does Bankruptcy Affect Renting

Become An Authorized User

Being added as an authorized user on someone elses credit card account can almost instantly boost your credit score. If the primary account holder has excellent credit, the authorized user will also show excellent credit on their credit report.

The credit card shows up on your credit report from the original date family member opened it, not when they added you to the account. So, being added as an authorized user can potentially add years of positive credit history to your credit report.

I Live In Canada How Can I Repair My Credit After My Bankruptcy

Rebuild Credit After Bankruptcy

After your bankruptcy is completed, credit repair in Canada can be achieved most quickly if you follow this six step plan:

  • Complete your bankruptcy in the shortest time you can. In Canada, if you were never previously bankrupt, you can qualify for an automatic discharge from bankruptcy in nine months. To be discharged this quickly, you have to make monthly payments and reports to your trustee and attend your credit counselling sessions. The sooner your bankruptcy is completed, the sooner it will disappear from your credit report, so complete all of your bankruptcy duties as soon as possible.
  • Start saving money. It is a simple fact of life in Canada: Banks lend money to people who dont need it, not to people who urgently require cash. To borrow again, you need to prove that you can handle money, and the best way to do that is to show that you have some savings. You probably were making monthly payments to the trustee during your bankruptcy. Now that your bankruptcy is finished, continue making those payments, but make them to your own savings account. Savings will be the foundation for your future borrowing.
  • Get a copy of your credit report. Go to Equifax, and Trans Union the two largest credit bureaus in Canada, and get a copy of your credit report. Check it for errors. If you find any, such as debts appearing that were included in your bankruptcy, notify the credit bureau immediately.
  • You May Like: Epiq Bankruptcy Solutions Llc Letter

    Diversify With A Loan

    The types of debt that you have matter when it comes to your credit score. So, you dont want to just have credit cards, because this doesnt show that youre maintaining a good mix of debt. With that in mind, your next step on the road to better credit is to take out a smaller sized loan that you wont have any trouble paying back.

    In most cases, this is going to be a small personal loan. You can use the money you receive for anything home repairs, making important purchases, or some people even take out loans and divert the money to an investment. That way, you get the credit benefit of paying off the debt while building a better financial outlook at the same time.

    In some cases particularly if you really need a new set of wheels to get to work then you may want to take out a slightly larger auto loan. This doesnt mean that you head out to a luxury car dealer and go crazy. Instead, you opt for a much more economical car and may have to use a lender who specifically works with high-risk borrowers.

    Even better, you can lend to yourself. Self, formerly called Self Lender, is a platform that allows you to take out a loan using your own money as a security deposit. Its a win-win: you get to build credit, and you dont have to borrow money you dont have to do it.

    How To Avoid Bankruptcy In The Future

    Opening a new credit card is only one piece of the puzzle when it comes to rebuilding credit.

    To make sure you dont fall into or bankruptcy again, you need to develop responsible credit management habits.

    Here are three basic rules you should follow during the credit-building process:

    • Make on-time, in-full payments each month: Set up autopay or create calendar reminders. By paying your balance in full each month, you can completely avoid interest charges on purchases with most credit cards.
    • Monitor your balances carefully: For the best results, limit your credit card balances to 10% of your available credit.
    • Limit your credit applications: Open new accounts gradually and only as needed.

    You dont need to wait 7 to 10 years to improve your credit. Follow the guidelines above, work on building good financial habits, and, little by little, youll bring your credit and your life back to where you want it.

    Recommended Reading: Car Loan After Chapter 13 Dismissal

    What To Do After Your Bankruptcy Is Discharged

    Once your bankruptcy is discharged, you should do the following:

    • Pull your credit reports from Equifax, Experian and TransUnion to confirm that your lenders are accurately reporting the discharge. Only the debts included in the bankruptcy filing should be reported as discharged.
    • Double-check that all of those accounts included in the bankruptcy show a zero balance on your credit reports.
    • Consider applying for a new credit card once youve confirmed that your credit reports are accurate.

    Even after your bankruptcy is discharged, it may take a while to qualify for a new credit card. Some credit card companies may reject your application simply because you have a recent bankruptcy on your credit report. Others may be less stringent because your risk of filing for bankruptcy again is low, since there are rules restricting when you can file for a second bankruptcy.

    Should You Get A Credit Card After Bankruptcy

    How to Painlessly Rebuild Your Credit After Bankruptcy

    Getting a credit card after bankruptcy can be a smart move, provided you can manage it responsibly.

    The bankruptcy will have damaged your credit score, and making on-time credit card payments is one of the best ways to rebuild your creditworthiness. Before filling out a credit card application after your bankruptcy, though, consider why you got into financial trouble and if you can responsibly manage a new credit account.

    Also Check: Did Dave Ramsey File Bankruptcy

    Apply For New Credit Cards

    After using a secured credit card, demonstrating new financial habits, and building up your credit score, the next step is to begin researching options for an unsecured card. When considering card options, keep in mind that the card issuers might have strict bankruptcy eligibility conditions, requiring card applicants to be bankruptcy-free for a certain number of years before approval. Not reading the fine print before applying for an unsecured card risks a denied application, which further hurts credit. However, take note that many modern lenders are surprisingly lenient with previous bankruptcies. American Express, for instance, previously required applicants to be bankruptcy-free for seven years prior to application. This policy has now been reduced to two years.

    When applying for unsecured cards, focus on cards with low interest rates and annual fees, as well as flexibility for applicants on their road to financial recovery. We recommend the MBNA TrueLine MasterCard, which offers rates ranging from 5.99%-14.99% and no annual fee at all. Another excellent option is the Essential card from AmEx, with 8.99% interest and a balance transfer promotion for 1.99% over the first six months.

    Apply For A Secured Credit Card

    After a bankruptcy, it may be difficult to get approved for new loans or credit cards. But having open credit accounts helps you to rebuild your credit. So what do you do?

    Secured credit cards are a great way to get started. You don’t need good credit to qualify for a secured credit card. Instead, you qualify by making a deposit that the creditor can keep if you stop making payments on the account. Here are a few key features to look for in a secured card:

    • Reporting to credit bureaus: Make sure the card issuer will report your account information to all three major credit bureaus , giving you a better opportunity to build up all of your credit scores.
    • Conversion option: Ideally your secured credit card will “convert” to unsecured after a set period of time. When it converts, you get your deposit back, as long as you’ve paid your balance. You can also keep using the card to help you continue building your credit history.
    • Deposit amount: The larger the deposit on a secured card, the higher your credit limit. Having more credit availablethat you’re not usinghelps you improve your and build up your scores.
    • Rates and fees: Fees and interest rates may be high compared with unsecured cards. Make sure you review the annual percentage rate , annual fee, maintenance fee and any other fees to choose the best secured card and keep your costs to a minimum.

    Don’t Miss: Renting A House After Bankruptcy

    Your Credit Report After Bankruptcy

    For the years following your bankruptcy, monitor your credit reports regularly. Watch for errors and then file disputes. Get help from a who can spot inaccuracies, dispute the errors and coach you toward your best credit score possible.

    Lexington Law has helped clients work towards fair and accurate credit scores by leveraging their rights. Weve helped hundreds of thousands of clients remove unfair, inaccurate and unverified accounts from their credit reports.

    Make Affordable Purchases Only No Exceptions

    How Do I Rebuild My Credit After Filing Bankruptcy ...

    With access to credit cards and bank accounts, it might be tempting to fall into old habits. Splitting unnecessary or large purchases into multiple payments, using payday loans, or waiting until credit is maxed out before seeking help are risky financial practices. Use this fresh start as an opportunity to develop new, more responsible habits and to always keep them in mind when shopping.

    Recommended Reading: How Does A Bankruptcy Trustee Find Hidden Assets

    Tip No : Check Your Account Statuses Carefully

    Each account on your has an account status associated with it. Once your bankruptcy is complete, every account included in your filing should say discharged or included in bankruptcy.

    If you see anything else in the account status field for any of the accounts, then it is probably a mistake and it needs to be corrected. This includes statuses like, active, current, delinquent, or charged-off.

    Be Smart About Applying For New Credit

    Each new credit application prompts a on your credit report. Too many hard inquiries in a short period of time can hurt your credit score because lenders see it as risky behavior.

    If youre frequently denied for new credit cards, their requirements might be too high for you current credit profile. Keep an eye on your credit and be aware of issuers underwriting standards, so you apply for credit more wisely.

    Try a or become an authorized user first. You can also sign up for a rent reporting service that reports your rent payments to the credit bureaus. Having a more positive credit history will increase your chances of being approved for credit cards with stricter requirements over time.

    Recommended Reading: Copy Of My Bankruptcy

    How To Rebuild Credit Post Bankruptcy

    It is a common misconception that a person has to wait 6 years after his discharge, until the record of his bankruptcy drops off the credit bureau report, until he or she can start rebuilding credit after bankruptcy.

    This is not true!

    A person can start to rebuild credit as soon as he is discharged from bankruptcy.

    Rebuilding credit after bankruptcy will be quick and painless if you follow the steps provided here.

    You will be able to get a secured credit card and a car loan shortly after you are discharged.

    Make sure your credit limit stays manageagble and you dont get close to the limit.

    Any discharged bankrupt will be able to get a mortgage the hardest credit to secure at an interest rate comparable, or better, than a person who has never gone bankrupt, two years after the bankruptcy discharge.

    Paying your bills on time and making monthly payments will help you improve your credit.

    Capital One Platinum Secured Credit Card

    3 Easy Steps to Rebuild Credit After Bankruptcy.

    Verdict: While it doesn’t offer rewards, it does offer flexible refundable deposit options.

    Like the Discover it® Secured Credit Card, the Capital One Platinum Secured Credit Card requires you to submit a security deposit to open an account . But while most secured cards have a credit limit equal to the amount you deposited, the Capital One Platinum Secured Credit Card starts your credit limit at $200, even if you’ve only chosen to deposit $49.

    If you don’t mind putting down a higher deposit, the Discover it® Secured Credit Card still offers better rewards than the Capital One Platinum Secured Credit Card, but Visa and MasterCard products have the added perk of being accepted at more places nationwide than most Discover cards. Note that to pay the Capital One Platinum Secured Credit Cards security deposit youll need access to an authorized bank account.

    • Rewards: No

    Don’t Miss: How Many Bankruptcies Has Donald Trump

    Ask An Attorney: How Long Does It Take To Rebuild Credit After Bankruptcy

    Free Consultation Las Vegas Bankruptcy and Debt Settlement Lawyer. 818-3888. Nevada Chapter 7 & Chapter 13 Lawyers with $0 Down. 5 Star Debt Relief, Bankruptcy, Consumer Protection, Real Estate, Personal Injury

    Question: My bankruptcy was just discharged, and I feel like Im finally able to start living again after many years stuck in debt. Unfortunately, my credit score is low and Im considered a subprime borrower by the lenders. What can I do to start rebuilding my credit score?Answer: While the task may seem daunting, its absolutely possible to rebuild your credit score following a bankruptcy. In fact, when handled properly, many people can achieve a credit score of 700 or more within two years.

    The process of rebuilding your credit will take patience and dedication, but its one of the most important steps to correcting your financial situation. You dont need a sterling credit report or the highest score possible, but you will need to make improvements to increase your score and loan-worthiness going forward.

    Having a low credit score can make qualifying for a loan of any kind difficult. Even if youre approved, your interest rates are likely to be high, which can lead to more debt down the road.


    Popular Articles