Credit repair after bankruptcy
Surprisingly, credit repair can be quite simple after bankruptcy. The beauty of bankruptcy is that having a successful bankruptcy means your debts are all but wiped out, in many cases. There are many options for obtaining credit after filing for personal bankruptcy, but these options may seem a little different than what you are used to.
After personal bankruptcy
When you file for personal bankruptcy, you choose either a Chapter 7 or a Chapter 13. A Chapter 7 is known as a liquidation bankruptcy, and it is a short process where your bankruptcy trustee is responsible for the sale of your property. exempt in order to pay off your creditors. A Chapter 13 gives you time to try to pay off your debts, you come up with a payment plan that you can stick to with the help of your trustee.
Either way, bankruptcy dramatically lowers your credit score and may require you to seek out subprime lenders if you need to borrow again. Bankruptcy stays on your credit reports for seven or 10 years, depending on which chapter you file. However, its impact on your score decreases from year to year.
3 steps to repairing your credit after bankruptcy
The key to repairing your credit after bankruptcy is to take advantage of your clean slate and start building good credit habits. There are several things you can do that can help build your credit.
These four habits could help:
- Avoid using credit cards. If you don’t have the money to make the purchase, don’t take out the plastic! Adopting bad spending habits could put you back into bankruptcy. It is a good practice to only buy what you can afford with cash on credit. That way, if you use the card to earn points or save miles, you can. But, put the money aside for the purchase and pay the entire bill, not just the minimum payment.
- Stay up to date on your invoices. Another step to building credit and not relapsing into bankruptcy schemes is to stay on top of your bills. This means not having to choose what you pay for and being smart about how you pay them. Don’t let small bills fall through the cracks.
- Pay your bills on time, every time. This is one of the biggest keys to repairing your credit after bankruptcy. Payment history is 35% of your credit score, so paying all of your bills on time can really boost your credit score.
- Be patient. Remember that time heals all wounds, and the same goes for nicks in your credit score. Going through bankruptcy, the damages decrease after each passing year. If you keep control of your bills, avoid things in collections, and avoid defaults, your credit reports will thank you.
Unfortunately, passive credit improvement is not the fastest route you can take. In order to build your credit after bankruptcy, you may need to take steps to see real results.
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3 actions that can create credit
Credit repair after bankruptcy is possible, and there are several ways to do it. Since you are likely facing a lower credit score than before you made your deposit, it may take a few extra steps to find the credit you are looking for.
If you need to start rebuilding your credit score, try these three options:
- Get a secured credit card. A secured credit card is a card you make an initial deposit on that becomes your limit. If you use a secured credit card responsibly, you usually get your initial deposit back after the balance is paid off. If you don’t manage your credit and start missing payments, your deposit can be used to cover bills. Secured credit cards give you the ability to build credit by making payments on time and adding a revolving line of credit to your credit reports. Keeping a good mix of credit cards and installment loans also helps.
- Get a credit builder loan. A credit builder loan is a concept similar to a secured credit card. You make deposits into an account and build your credit by making payments over a fixed term, usually in the range of one to two years. Once you have completed the loan, you get the money. It is reported as an installment loan.
- Build your credit with auto credit. An auto loan for bad credit is a great way to work on credit repair after bankruptcy. By applying to a subprime lender through a special finance broker, your credit doesn’t stand between you and the vehicle you need. Every payment on time improves your credit score and you add an installment loan to your credit reports. Plus, auto loans tend to be long – typically four years or more – which gives you a wonderful opportunity to build your credit over a long period of time.
Improve your credit with an auto loan
If you’re ready to get started with repairing your credit after discharging your bankruptcy, you can start here at Auto Express Credit. We want to make it easier to find the right lender to finance your next car loan by matching you with a local dealership who can help.
We’ve been connecting people with dealers in their area for over 20 years, and we want to do the same for you. To start your next car loan now, simply complete our fast, free, no-obligation car loan application form.