Filing for bankruptcy gives you the opportunity to get a clean financial start — but after filing bankruptcy most people worry about rebuilding their credit history.
It is a common misconception that bankruptcy will ruin your financial future forever. The truth is you can start restoring your credit right away and it is easier than you think. Everyone makes mistakes especially when money is involved, so don’t feel bad if your credit is less than stellar. Plenty of people are in the same situation you’re in, and there are ways to get out of it.
First Step Is To Create A Budget
If you’re like most people, you probably hate the thought of making a budget. Perhaps it seems too difficult, or simply unnecessary. But in reality, making a budget is a simple process and one that can save you a lot of money. Just focus on completing one step at a time. Figure out what you have coming in, what is going out and keep track of it on a weekly basis.
If You Have A Credit Card, Keep Your Account Open
If you have bad credit but still have credit cards, you’re better off than you could be. You may be tempted to cancel all your cards and swear off credit forever to avoid making more mistakes, but don’t do that. If you close your accounts, it will be even more challenging for you to open new ones, because if you already have bad credit, companies won’t want you.
If You Don’t Have A Credit Card, Get One
If your credit is bad, you can’t expect to get good card offers, so you’ll have to work with what is available and be cautious.
- Investigate cards meant for people with bad credit. Even if you have bad credit, banks still want your business.
- You can’t rebuild credit without a credit card, so take whatever you can get – even if it has terribly high APR or requires you to pay service fees.
Make Small Purchases And Pay Them Off Within A Month
If you are rebuilding credit, you shouldn’t be using your card for any major purchases or for anything that will put you into more debt.
Here are two tips to get the most credit building power out of your credit card:
- You should use your card regularly, however, start to get in the habit of only using it for one thing, like gas or prescriptions – something that you would be paying for anyway.
- Pay your bills as soon as you get them so that you can avoid collecting interest and stay out of debt.
Pay Your Bill Several Days In Advance
Plenty of credit ratings have gone down due to honest mistakes. Say your payment is due on the 28th of every month, and the 28th happens to fall on a Sunday but you don’t notice until it’s too late. You may make your payment on the morning of Sunday the 28th, but because it’s a Sunday, the payment won’t take effect until Monday the 29th. You could be charged a late fee or worse, your minimum monthly payment amount could be raised. In any case, your credit rating will be affected. Better safe than sorry – make a point of paying your bill a few days in advance.
Since you won’t be able to use your credit card for major purchases while you’re rebuilding your credit, you may have to live on a budget for a while. You’re not just rebuilding your credit – you’re rebuilding your financial well-being. It may be a difficult process, but you will be grateful for the work you put in when you see results.