If you're looking at the possibility of bankruptcy, you might be thinking that your credit will be ruined. While bankruptcy will put a ding in your credit for a while—it will stay on your credit report for 7 to 10 years—there are ways to start rebuilding as soon as your bankruptcy is discharged. Here are four simple ways you can rebuild your credit after bankruptcy.
Stick to a Budget
Once you've filed for bankruptcy, you'll need to be careful with your finances, especially if you want to avoid future problems. One way to avoid financial problems is to create a budget—and stick to it. This is particularly true if overspending was a cause of your bankruptcy. Creating a budget will allow you to keep track of the money coming in, as well as the money going out. It will also help limit the frivolous spending that might have gotten you into trouble in the past.
Get a Secured Credit Card
After your bankruptcy is discharged, you'll want to start rebuilding your credit as soon as possible. The best way to do that is with a secured credit card. With a secured credit card, your credit limit will be guaranteed by a cash deposit that you'll provide. For instance, if you provide a $500 deposit, you'll receive a secured credit card with a $500 credit limit. Make small purchases using your secured credit card each month, and then pay them off the next month. By keeping your credit balance low and making your payments on time, you'll be working towards rebuilding your credit. As you rebuild your credit, avoid taking on additional credit cards. That practice will only put you in danger of future credit problems.
Pay Your Bills on Time
You might not realize this, but late payments can also harm your credit. While you're rebuilding your credit following a bankruptcy, be sure to make all your payments on time. Making your payments promptly will help you boost your credit score.
Monitor Your Credit Report
If you don't already monitor your credit report, you need to start. Knowing what's on your credit report will help you avoid credit problems later. It will also ensure that your bankruptcy information is reported properly. If you see errors on your credit report, you need to work to have them removed or corrected.
Don't take chances with your credit. If your only option is bankruptcy, use the tips provided here to start rebuilding your credit as soon as possible. Be sure to talk to your bankruptcy attorney to learn more about other ways to rebuild after a bankruptcy.