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Rebuild Credit After Bankruptcy?

Struggling to build credit after bankruptcy? Let us walk you through some of the proven ways to rebuild your credit score.

Going through bankruptcy can be an emotionally difficult and financially devastating experience. Once it’s over, you’ll likely be eager to start rebuilding your credit so you can qualify for loans, mortgages, credit cards, and other financial products in the future. Rebuilding credit after bankruptcy takes time, dedication, and strategic planning, but it can be done. Here are some practical tips to help you get started.

Check Your Credit Report

The first step is pulling your credit report from all three of the major credit bureaus – Equifax, Experian, and TransUnion. Review the reports carefully and dispute any inaccuracies with the credit bureaus. Mistakes are common in credit reports, so don’t assume everything in there is 100% correct. Getting errors removed can give your score an immediate boost.

Establish New Lines of Credit

While it may seem counterintuitive when you’re trying to rebuild credit, opening new credit accounts is important for establishing recent positive payment history. Aim to open 2-3 new credit cards and a secured loan using your money as collateral. Make at least the minimum payments on time each month to demonstrate you can responsibly manage credit.

Keep Card Balances Low

Ideally, you want to keep credit card balances below 30% of the credit limit on each card. Having high balances can negatively impact your credit utilization ratio, which makes up a significant portion of your score. As a rule of thumb, try to only put normal living expenses on credit cards that you can afford to pay off in full each month.

Avoid Closing Unused Cards

You may be tempted to close old credit card accounts you don’t use anymore, but this can actually hurt your credit score. The longer an account stays open, the more it helps your credit history, so keep unused cards open. Just be sure to check them periodically for fraudulent charges.

Consider Secured Cards

Secured credit cards require a cash deposit that serves as your spending limit and collateral if you default on payments. They make it easier to qualify while rebuilding credit. Charge small purchases every month and pay off balances promptly. After 6-12 months of consistent payments, you may qualify to graduate to an unsecured card and get your deposit back.

Bring Any Delinquent Accounts Current

An essential step in credit rebuilding is bringing past due accounts up to date and continuing to make on-time payments. Contact creditors, explain your situation, and discuss options to become current on the account. Resolving delinquencies prevents additional damage to your score.

Dispute Errors on Your Report

If you find any errors, discrepancies, or outdated information on your credit report, dispute them with the credit bureaus. Common report mistakes include closed accounts listed as open, payments marked late that you paid on time, and debts from a bankruptcy showing incorrectly. Dispute inaccuracies in writing with supporting documentation, and the credit bureaus typically must investigate within 30 days.

Limit New Credit Applications

It’s tempting to apply for lots of new credit when rebuilding your score, but a flurry of hard inquiries from denied applications can actually hurt your efforts. Aim to only apply for credit that you have a reasonable chance of receiving based on your present situation. Too many denied applications indicate risk to lenders.

Talk to Your Bank

Speak with a bank representative about secured credit cards or loans that require you to put money down upfront and use it as collateral. Explain that you are in the process of rebuilding credit. Banks sometimes offer these options to new customers trying to establish or reestablish creditworthiness.

Consider Adding Your Rent Payments

Companies like RentTrack allow you to report on-time rent payments on time each month. These payments get added to your credit profile, helping demonstrate responsible bill payment history. Some services charge monthly fees and others simply verify rent payments for free to remove barriers for people rebuilding credit.

Become an Authorized User

Ask relatives or friends with exceptional credit to add you as an authorized user on a credit card they already manage responsibly. Avoid authorizing user status on cards with late payments or high balances. As an authorized user, the account gets added to your credit report and you can benefit from their strong payment history.

Dispute Bankruptcy Notations

Bankruptcy public records normally appear on your credit report for 7-10 years depending on the type. If your reports show a bankruptcy beyond this period, dispute the information to have it removed. An outdated bankruptcy notation negatively impacts your ability to qualify for new credit products.

Establish Non-Traditional Credit History

Non-traditional credit references like rent, utility payments, cell phone bill payments, and insurance premium debits don’t automatically appear on credit reports, but you can request they get added. Companies like LexisNexis Risk Solutions let you open a file with this payment information for a possible score boost when applying for future loans.

Practice Good Financial Habits

Make payments, including rent, utilities, phone bills, etc. on time every month – set reminders if needed. Maintain low credit card balances compared to limits and avoid unnecessary loans or financing applications. Developing strong money management discipline helps demonstrate financial responsibility to future lenders.

Leverage Credit Counseling Services

Reputable non-profit credit counseling services can provide guidance tailored to your unique financial situation. Accredited counselors review your budget, debts, income streams and spending habits to create a personalized credit rebuilding plan. They offer support through the bankruptcy process, answer credit questions, equip you with education materials and refer you to appropriate debt relief resources. Consult a counselor early when trying to restore creditworthiness after bankruptcy.

Enroll in Credit Monitoring

Credit monitoring services like Credit Karma and Credit Sesame allow you to track changes to your credit reports and scores for free. Monitor key influencing factors like credit utilization, payment history, credit age, hard inquiries, and public records regularly when rebuilding credit. Enable text and email alerts for credit report changes and review changes promptly to ensure nothing erroneous or fraudulent impacts your progress.

Research Lender Second Chance Programs

Many major banks now offer special second chance programs designed specifically for customers rebuilding credit after events like foreclosures or bankruptcies. These programs make it easier to open checking/savings accounts and get approved for starter credit cards and auto loans despite recent struggles. Do some research online to learn which lenders offer second chance financial products to help people restore creditworthiness.

Leverage the Power of Time

One of the most effective and proven ways to rebuild your score is letting time work on your side. As you consistently make on-time payments and keep credit balances low, the negative impact of your bankruptcy gradually decreases. Generally, credit scores slowly recover in increments over six months to a year after filing bankruptcy. Let your prudence shine through late payments, collections or other negative items don’t outweigh the time factor’s positive influence.

Save Regularly

Establishing consistent savings contributions demonstrates financial stability to potential future lenders. Set up automatic monthly or biweekly transfers from your checking account or paychecks into high yield savings accounts. Watch the interest compound and your balances grow. Maintaining savings helps qualify for loans requiring down payments or collateral. Savings also enable you to pay cash more easily for large purchases rather than relying on financing.

Reapply for Credit Selectively

A key step in credit rebuilding is reapplying for credit but be selective in deciding when and where to apply to avoid unnecessary score dings. Every application triggers a hard inquiry on your report, which can briefly negatively impact scores. Wait at least 6 months after bankruptcy before applying and then limit applications to 3-4 attempts per year at establishing positive new credit history with secured cards and small personal loans using money on deposit for collateral.

Once approved for a new credit card or loan, use them prudently by making consistent on-time payments and keeping balances well under limits. After 6 more months of positive credit management, you can request credit line increases to further help strengthen your utilization ratio. At around the one year mark post-bankruptcy, you may consider applying for 1-2 more cards to continue developing diversity in positive payment history.

Be choosy by researching lenders offering the best possible approval odds and terms for someone in your rebuilt credit situation. Having a prequalification or high likelihood of approval makes the hard inquiry worthwhile. As positive payment history ages and your score improves, you can more aggressively apply for premium travel and cash back reward cards to save money. Time and prudent account management are still imperative. But around the 18-24 month period post-bankruptcy, many prime credit products become attainable again through selective applications.

Regularly Request and Review Free Reports

A key right granted by the Fair Credit Reporting Act is the ability to access your credit report from each bureau for free once annually. As you rebuild credit after bankruptcy, request your free reports every 12 months and review the documents closely. Dispute any lingering inaccuracies that may be undeservedly weighing down your score.

Staying on top of report errors and monitoring improvement trends over time are invaluable parts of the post-bankruptcy credit restoration process. Sign up for Credit.com’s free reporting dashboard to conveniently view key indicators and access educational resources to support your progress. Consistently checking reports helps you take control by fixing mistakes and charting the effectiveness of your credit rebuilding efforts.

Be Patient

It takes diligence and patience, but rebuilding credit after bankruptcy is completely achievable over time. Consistently making on-time payments, keeping credit card balances low, disputing errors on your reports, and opening new responsible lines of credit all help improve your score. Monitor your progress periodically. Most bankruptcy notations fall off reports after 10 years, at which point your prudent financial habits really shine through. Stick with the program of developing good payment history and your creditworthiness will continue to strengthen.

Consider Selling to Us At We Buy Any House As Is

If you are struggling with mortgage payments or owning a home after bankruptcy, consider selling to a direct home buyer like us at “We Buy Any House As Is“. Our team can make the process quicker and easier compared to selling through traditional real estate channels. We Buy Houses Rochester and across New York, paying fair cash offers for homes in any condition.

Selling relieves you of mortgage payments and repairs, provides proceeds to pay down debts and improves cash flow to rebuild credit responsibly. We it simple by buying as-is without requiring repairs and covering fees for a fast, convenient home sale. The cash from selling can help reset your financial foundation after bankruptcy.

As a credible company, we buy houses for cash New York. This eliminates showings, makes a fair offer, pays cash and closes on your timeline. Look into selling your house to us as part of an overall credit rebuilding plan after experiencing financial hardships.

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