Five steps to improve your credit after bankruptcy

April 04, 2017
Bankruptcy can sometimes be the only viable option for solving personal financial issues.
Five steps to improve your credit after bankruptcy

Yes, doing this will damage your credit-worthiness in the short term, but you can take steps to quickly repair it. It is possible to put a positive spin on bankruptcy. You now have a chance to build your credit from scratch without making the same mistakes that you made in the past. 

Here are five steps that will help you make this “financial fresh start.” 

1: Pay your bills on time

One of the most important things that you can do after bankruptcy is pay your bills on time. Just one single late payment can damage your credit. If possible, set up automatic payments so that the service provider or utility company can simply deduct the money from a checking account. If this is not possible, you should either get in the habit of paying bills as soon as you get them or setting a reminder on your phone so that you do not forget the due date. 

2: Live within your means

Do not spend more than you earn. On a very simple level, debt (and bankruptcy) come from spending more money than you have. One of the best strategies for making certain that you live within your means is to use cash for day-to-day purchases. This will allow you to physically see how much money you have left for the week or month.  

3: Get a secured credit card

Using a credit card is one of the single best ways to improve your credit-worthiness. People who have recently been through bankruptcy can get a secured credit card. Secured cards are just like regular credit cards with one major difference: cardholders must make a security deposit that will cover the cost if they default on their payments. You do not have to make major purchases to build a credit history. You can use the card at the grocery store once every couple of weeks when you buy milk and bread, for example. 

After you make the purchase, you should pay off the balance as soon as possible so that you do not run the risk of missing a payment. 

4: Check your credit report

You can literally watch your credit improve. Credit bureaus like Equifax and TransUnion track credit history and provide personal reports. Anyone can order a report on their credit from these firms. 

5: Start a “rainy day fund” 

Often, the road to bankruptcy begins with unforeseen expenses. Home or car repairs, medical bills, and emergency travel are all reasons that people have gone into debt. You can start saving now for such expenses. Then, when they inevitably come up, you can handle them without having to borrow money or use a credit card. 

You can look at your bankruptcy as a positive thing. You now have a chance for a fresh start in your financial life.