You do not have to live without credit following a bankruptcy. By following a couple simple steps you can begin rebuilding your credit faster than ever, even after filing bankruptcy.
After filing for bankruptcy, many people are concerned about rebuilding their credit. While it will be more difficult to begin rebuilding your credit after a bankruptcy, it is certainly not impossible. You will have to pay higher interest rates on any money you borrow. This is because creditors deem you as "high risk" because of your bankruptcy filing. Once you begin rebuilding your credit however, and start showing creditors that you are a responsible borrower again, you will notice that your interest rates begin to decline and credit terms loosen up.
You will probably want to rush things trying rebuild your credit almost immediately after filing for bankruptcy. It is better if you take your time, however. If you have filed Chapter 13 bankruptcy, you should first focus on making your monthly payments to your creditors. In this situation, it is best to wait at least eighteen months before you start applying for new credit. If by that time you have not eliminated your bankruptcy debt, then you should allow even more time until you do not have any other debts to worry about.
The best way to begin rebuilding your credit after bankruptcy is to obtain a secured credit card. You should do this only after you have been discharged for all of your debts. With a secured credit card, you make a deposit into a savings account that is used as a security deposit for your credit card. Your credit limit will range between fifty and one hundred percent of your deposit. Some banks will pay you interest on your deposit and allow you to choose between a savings account, money market account, or a certificate of deposit.
When you apply for a secured credit card, you should be prepared to pay fees for the credit card each month or year. Secured credit cards often come with additional fees that must be paid in order to get them. Sometimes, application and processing fees are required upfront. Most secured credit cards also require you to pay an annual fee as well. Compare the total amount of fees that you will pay when you are shopping around for a secured credit card.
After you maintain a positive credit history with your secured credit card for 12-18 months, you will likely be eligible for an unsecured credit card. In the meantime, creditors will often increase your credit limit when you regularly make your payments on time.
Trying to finance a car or a home after filing bankruptcy will depend on the lender. Some lenders work with consumers who have recently filed bankruptcy while others will not. Be aware that a recent bankruptcy filing will have an effect on your interest rate, even if you now have a favorable credit rating.
Good credit after bankruptcy is attainable. Make sure that you remain responsible with your spending and show a positive payment history. Things will get better!