Tips To Fix Credit After Bankruptcy

2019/02/25

Just because you are bankrupt, it does not mean that you should lose hope. There are still plenty of ways to fix credit after bankruptcy and to bring your finances back on track. Though bankruptcy is used as the last option to get relief from overwhelming debts that you are unable to pay otherwise, it affects the financial life of the person getting bankrupt quite harshly.

Bankruptcy stays in your credit report for a period of seven to ten years. The poor FICO score makes it very difficult for you to get new loans, mortgage, insurance policies and credit cards.In fact, many employers these days also look at the candidate’s FICO report to determine their eligibility for various job positions.

It means the poor credit score caused by bankruptcy can also minimize your job opportunities. Even landlords prefer to rent their apartment to those who have maintained a good credit record. In short, your financial life can become very difficult when you go bankrupt. But, don’t panic. There are a lot of things you can do to regain control of your financial life. Following is a brief rundown on some of the basic steps that you can follow to fix your credit.

Obtain A Secured Credit Card

Obtaining and using a secured credit card is the easiest yet highly effective method to fix credit after bankruptcy. Lenders often do not entertain applications for new loans or credit cards from bankrupt individuals while sub-prime lenders that issue loans to even high-risk applicants often charge extremely high rate of interest to cover the risk. The beauty of a secured credit card is that you can obtain it quite easily from a prime lender at a very attractive rate. The facts that you are bankrupt and that you have bad credit are not taken into consideration to determine your eligibility. In order to obtain a secured credit card, all you have to do is to pay a certain amount of money as deposit.

The amount of deposit becomes the maximum credit limit for your account. Since you cannot use more than what you have deposited, there is no risk of going overboard and spending more than what you can afford to repay. Your strategy should be to use this credit card to pay for your necessary purchases and then to repay the balance every month in a timely manner. When you do this consistently for six months, your good credit history for this time period will reflect quite positively in your FICO score.

Obtain An Installment Loan

Besides obtaining a secured credit card, getting an installment loan and making timely repayment on it can also prove to be very helpful in fixing your credit after bankruptcy. In the current financial market, it is not very difficult to obtain a bad credit loan from a sub-prime lender. A thorough comparison shopping can help you to get a loan that does not charge you a very high rate of interest. Here again, the strategy is to make timely repayment.

While you are working on the above strategies, you must also take certain precautions. For example, you should never make lots of enquiries for new loans or credit within a very short period of time, as it can adversely affect your credit score. Overall, though it may take some time (from six months to a year or two), it is not very difficult to fix.

Photo Credit: Asraraha.com

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