Bankruptcy has the reputation of ruining your credit score and may seem like the end of the road to many. It does stay on your credit score for up to ten years, but building credit afterwards can help you look better when applying for apartments and even jobs. Bankruptcy is often a way for people with debt problems to turn their financial habits around and start building a positive credit score again. There are ways to obtain credit after bankruptcy, and ways to start spending responsibly.
Obtaining Post-Bankruptcy Credit
Bankruptcy should eliminate a large portion of your debt (if not all of it). If this has occurred, lenders may extend credit card or loan offers your way. It is important to remember to start small when you consider taking on debt again. In some cases, getting a secured credit card, which you pay for in advance, may be your best option. Secured cards can often be transitioned into regular, or unsecured credit cards.
How Should You Manage Your New Credit?
- How much do you need to borrow? Having a credit history is good, but having too many credit cards or loans is an easy way to get back into debt. Keep in mind, since you have bankruptcy on your record you will likely be paying higher interest rates and fees. Start with borrowing a small amount and make sure you can manage it properly before taking on more debt.
- Start Budgeting: You need to pull aside extra money to pay off the money you borrow each month on top of your living expenses. Overspending can leave you with unpaid debt, which you will pay more interest and late fees on if you cannot make the minimum payment on time. Budgeting will save you more money and increase your credit score.
- Turn on Autopay: Everyone forgets important things every now and then, including bills and payment due dates. Autopay will draft money out of your account before you can be charged late fees or additional interest, but make sure you are maintaining enough of a balance to cover all your expenses.
- Check your credit report: You can get a copy of your credit report each year from federal bureaus. Check the information on it to make sure it is accurate. Partnering with a bankruptcy attorney can help you find out if there is a reporting error, which are more common than you may think.
There are multiple ways for you to continue to borrow money after bankruptcy. However, it is important to remember why you had to file in the first place. Take bankruptcy as a wakeup call to start budgeting and taking on manageable amounts of debt you can pay off each month so they don’t continue to grow larger.
Washington DC bankruptcy attorney Kevin d. Judd offers free consultations to help with many kinds of consumer debt settlement.