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Rebuilding Your Credit After Bankruptcy

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How to Rebuild Your Credit After Bankruptcy

Although bankruptcy can stay on your credit record for seven to ten years, you may be able to rebuild your credit much more quickly. Often, you can rebuild your credit to a point that will get you approved for a loan, even a home mortgage, in as little as two years. Whether or not you are approved for a loan is based on the individual creditor’s criteria and has nothing to do with the bankruptcy laws. Most creditors look for steady employment and a history, after bankruptcy, of making and paying for purchases on credit.

In the long run, bankruptcy may improve your ability to obtain future credit. One of the most important items on your credit report is your debt-to-income ratio. After a bankruptcy discharge, that number usually improves substantially because your debts are largely eliminated. Also, without the burden of debts, you can save for a down payment on property, which always improves your standing with lenders. You also may not realize you will be eligible for a federally secured FHA Loan just two years after bankruptcy.

Create a Budget

The first step to rebuilding your credit is staying within a budget. It’s important to control your spending and save money after bankruptcy. Think about small steps you can take to reduce spending and save even just a few extra dollars a week. Setting and achieving small goals can be inspiring and lead you to much more significant savings than you thought possible. Most people can cut at least 5 percent of their spending by planning out purchases, paying with cash, and going out to eat less often.

Review Your Credit Report

Credit reporting agencies often inadvertently put negative entries on your credit report that don’t belong there. With so many files to manage, there are bound to be mistakes. It’s a good idea to periodically review your credit report to ensure all entries are accurate. If there are incorrect entries, you may challenge those items. The credit reporting agency will correct your file if they can’t verify the item. To contact the credit reporting agencies, you can use the following links: www.equifax.com, www.experian.com, and www.transunion.com.

Get a Loan or a
Secured Credit Card

MBanks provide an excellent opportunity to rebuild your credit by offering secured loans or secured credit cards. Secured loans are linked to some piece of property, such as your car or machinery you may own. If yodon’t’t have any security to offer, it is usually possible to get a bank loan with a co-signer. For maximum benefit, keep the loan active for at least six months, even if you can pay it back sooner. This will allow the bank to report the loan to all three credit reporting agencies. Interest rates and prepayment penalties are things to consider when shopping for a loan. Naturally, you want the lowest interest possible with no prepayment penalty. Secured credit cards offer similar benefits to bank loans and give you a chance to rebuild credit.

Contact Whitten & Whitten Today

While bankruptcy may initially seem like a setback, it can catalyze positive change in your financial life. By adhering to a budget, reviewing your credit report regularly, and responsibly utilizing tools like secured loans or credit cards, you can rebuild your credit faster than you might think. At Whitten & Whittenwe’rere here to help guide you through this journey towards financial freedom.

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