Restoring Your Credit After A Bankruptcy

Filing a bankruptcy may be your only option when your debt escalates to the point of no return. Unfortunately, bankruptcies ding your credit more than just a little and for longer than a few months. How can you restore your credit and reclaim your ability to enjoy life?

Building your credit after a bankruptcy begins the day after your debts have been discharged. This task requires patience, hard work, and the determination to avoid debt in every corner of your life. You’ve already fallen down the dark tunnel of not being able to pay your bills once, and there’s no need to do it a second time. Here’s a look at the ways you can rebuild your credit now that your bankruptcy is finalized.

Pay Your Bills Responsibly

When you are trying to establish good credit after a bankruptcy, you should take the time to put together a budget. Figuring out how much money you have to put toward bills should help you to do so. Take a look at all sources of income, including salaries, royalties, and disability payments. Budgets provide an easy way to ensure you have enough money to cover your monthly obligations. Remember that you may also have unresolved debts from your time prior to the bankruptcy. Debts such as money owed to the government, student loans, alimony, child support, and reaffirmed debts are still your responsibility, and you must make payments on them.

Limit Impulse Purchases

Avoiding debt minimizes the risk of needing to file a second bankruptcy. Limit your impulse purchases and try to avoid buying anything that requires a loan or credit application. You may want to create a savings account designed to help you accumulate enough cash to pay for your purchases in full. Wait until you have sufficient funds to pay for the item in full. Don’t forget about any state tax that may be due on your purchase.

Use Prepaid Credit Cards

A prepaid card provides an easy way to start rebuilding your credit after a bankruptcy. This type of credit limits how much you spend. You place the funds on the card, and you can only spend the amount remaining on the prepaid card each time you go to use it. Since you are trying to rebuild your credit without falling into debt again, you should limit how much money you place on the prepaid card. Ideally, you should only use funds that aren’t needed for other expenses such as mortgage, rent, insurance, transportation, and daily living expenses.

Create An Emergency Fund

Going through a bankruptcy creates a lot of negativity. Your credit sinks into nonexistence, and your possessions dwindle in size and number. Plus, your self-esteem has probably taken a big hit as well. Creating an emergency fund can help in all of these areas, slowly boosting your credit and allowing you to feel better about yourself.

Rebuilding your credit after a bankruptcy can be a tedious task. However, you can approach this goal along several pathways. Make sure that you pay your bills in full, limit unnecessary spending, and build up a small sum of money to help you out when an emergency arises. Just remember to consider hiring an attorney if you need to file for bankruptcy. An attorney can guide you along the bankruptcy process and provide guidance on what to do afterward.