When a person declares bankruptcy, they are doing something that affects their finances and credit score. If you have a low credit score, you will have problems getting loans, credit cards and rental agreements; financial agencies look at your credit history before determining your credit worthiness. A bankruptcy can stay on your credit report for up to 10 years; during this time, your credit score suffers. Fortunately, there are practical steps that you can take to improve your credit score after a bankruptcy. Follow these steps to get yourself back on a better financial path:
Adopt A New Attitude Experts believe that your attitude plays a major role in how fast you recover after a bankruptcy. If you wallow and loaf around, you are less likely to attempt to fix your problems. Everyone makes mistakes; it is up to you to design a new game plan that will keep you out of debt in the future. When you change your attitude about credit, you prevent yourself from making the same mistakes in the future.
Pay Your Bills Some people make the mistake of ignoring their obligations after a bankruptcy; what they don’t realize is that their payment history accounts for about 35 percent of their credit score. If you consistently pay your bills, your credit score will slowly start to improve. If you ignore them, you will just get more negative marks on your credit report. When you are in a financial bind, paying your bills is the easiest way to start making improvements; these bills are the foundation of what your new credit report is built on.
Cut Down On Expenses It is important to take a hard look at your lifestyle; go through your expenses so you can figure out where you are spending money frivolously. After bankruptcy, you have to learn to live on cash; without credit, you don’t have as much of a cushion. Make a budget and always stick to it. You may have to go without some luxuries, but it is all worth it in the end. Once you learn how to live within your means, you will be less likely to depend on credit in the future. Learn to save and budget your money; after a while, you will find that saving money becomes easier.
Get Your Credit Report Once your bankruptcy is discharged, you need to get a copy of your credit report. Most people request these reports online; you can also send a request to all three credit bureaus in writing. Take a look at your FICO score; this is a condensed version of your credit history. Look through your report for any errors or omissions. If you find errors, fill out the special form that comes with your credit report; there is a section where you can explain why the items are incorrect. By law, the credit bureau has to review this information and respond to you within 30 days.
Cautiously Apply For Credit If you don’t have a major credit card, you need to apply for one after bankruptcy. Most people start with a secured card; these cards require a deposit with the issuer. Once you get the card, make sure to pay the bill off every month. You don’t have to carry a balance on your cards to build your credit. Always be aware of your card’s limits; make sure to keep your balances well below them. Due to your credit history, your limits are probably going to be lower than you are used to. Use your cards sparingly, and always make sure to pay them off on time. Don’t close your accounts; after a bankruptcy, many people swear off credit altogether. This can damage your credit in the long-run. If you follow the guidelines above, you can slowly move towards a brighter future. Be patient, improving your credit takes time and perseverance.