How Can I Rebuild my Credit After Bankruptcy?

How Can I Rebuild my Credit After Bankruptcy?

Filing for bankruptcy will change your life. Do not expect a “magic bullet” or a stress-free automatic debt discharge. You will need to work closely with your bankruptcy trustee to complete all the necessary steps of the process before you can have your debt discharged. While your case is pending, make an effort to develop new financial habits and start rebuilding your credit. It is never too soon to start making an effort to recover your credit.

Below are three tips to keep in mind after you file for bankruptcy. Your lawyer and your credit counseling agency can also help you establish prudent spending habits and take steps to rebuild your credit. If you are not sure about a certain purchase or offer, ask your lawyer or credit counselor.

Open a New Credit Card

Although it can seem counterintuitive, it is actually in your best interest to open a new credit card after you file for bankruptcy. If you do not qualify for an unsecured card, consider opening a secured credit card. This is a credit card backed by the collateral and in most cases, this collateral becomes the card’s credit limit. Some secured cards have the option to upgrade to an unsecured after a specific period of time, others do not have this option. To rebuild your credit with your new card, make it a priority to pay off the card’s balance in full every month.

Do Not Close Existing Accounts

Keep your existing credit accounts open. Your credit score is primarily calculated using your available credit and your debt level in relation to this available credit. If you close an account, you lose that available credit and drive your score down.

Consider using these cards sparingly or, if you do not feel you can keep them without falling into old habits, destroy the cards. No matter what you choose to do with your existing credit cards, keep their accounts open.

Save, Save, Save (And Budget!)

Ideally, you will also make a strong effort to save money after you file for bankruptcy. Put this money directly into a savings account or another type of account where it cannot be easily accessed. Consider investing the money, but remember to keep enough accessible in case of an emergency.

Sticking to your budget can help your credit score recover because it will ensure that you always have money available to pay your bills. In the event of a sudden expense, use the money in your savings account to pay for it, rather than charging it to a credit card.

Work with an Experienced Merrillville Bankruptcy Lawyer

Bankruptcy is more than just a way to discharge your debt. It is the beginning of a new chapter in your life, a chapter marked by a deeper understanding of how credit works and new approaches to spending and saving money. For more guidance as you work through the bankruptcy process and life in the years that follow, speak with an experienced bankruptcy attorney. Contact The Whitten & Whitten today to set up your free consultation with us.