Facing bankruptcy can feel overwhelming, but it is important to remember that it is a financial tool designed to give you a fresh start. While it will impact your credit score, there are steps you can take to rebuild your credit and move forward with your financial goals.
There are a few practical strategies that you can take after bankruptcy to help you get back on track and improve your credit score.
Check your credit report
Your credit report is like a report card for your borrowing history. It shows lenders how you have handled your finances in the past. Each year, the three major credit bureaus, which include Equifax, Experian and TransUnion, must provide you with a free report at your request. After getting your reports, look for mistakes or errors and dispute them with the bureaus right away.
Make on-time payments
The golden rule of rebuilding credit is to pay your bills on time, every time. This includes things such as rent, utilities, phone bills and any credit cards you still have. On-time payments show lenders that you are reliable and responsible with your money.
Start slow with new credit
Do not rush out and apply for a bunch of new credit cards right after your bankruptcy. Instead, consider getting a secured credit card. Secured cards require a deposit upfront, which becomes your limit. If you use the card responsibly and make your payments on time, it will help improve your credit score.
Be a responsible authorized user
If you have a friend or family member with good credit, you may be able to become an authorized user on their credit card. This means you get a card with their account number on it. However, do this with caution because their spending habits will affect your score too. Only become an authorized user if you trust the person and know they use credit responsibly.
Monitor your progress
Keep an eye on your credit reports and scores. You can check on them throughout the year with the help of free credit monitoring websites and apps. Seeing your score go up over time is a great motivator that can help you stay on track as you continue building your credit.
With dedication and smart financial choices, you can turn your bankruptcy into a stepping stone to a brighter financial future.
