3 Quick Tips on Rebuilding Credit after a Bankruptcy
What’s a bankruptcy? Bankruptcy is a complex legal process created by Congress to provide relief from financial distress when you can no longer pay your debts. By and large, it’s the worst thing that can happen to your personal finances. In laymen terms, it pretty much means that financially something major has gone wrong. Perhaps you lost your job—even worse, maybe you lost a love one? Indeed, there are millions of reasons why consumers file for chapters’ 7 and 13 bankruptcy help every year. However, the common denominator to take the bankruptcy plunge seems evidently clear: many consumers are simply in need of a “fresh start.” If for whatever reason you can’t pay back your unsecured debts (i.e., credit cards, medical bills, etc.) then a bankruptcy filing does indeed make sense—but at what price? It’s true that commercial banks tend to shy away from people who have filed for bankruptcy; nonetheless, you can get a mortgage in as little as six months after a bankruptcy is discharged. It’s not uncommon to get credit card offers before your case has even closed. Truth be told: there is light at the end of a bankruptcy’s dark tunnel. The following list highlights three quick tips you can use to rebuild your credit after a bankruptcy:
Tip#1 Opening up a Savings & Checking Account…
Following a major financial disaster of any kind—whether it be a few credit card charge-offs, an auto loan repossession or a major catastrophe in the likes of a Chapter 7 bankruptcy requires a strategic plan of attack. Perhaps within this same line of thinking, one of the very first things you’ll certainly want to do is open up a bank account of some kind. The reason: What a bank account does is say to the financial world that you have it all together in regards to your personal finances. Furthermore, the ability to save money, cash payroll checks, and pay bills online are all interconnected with your bank accounts.
Tip #2 Applying For Secured Credit Cards…
After finding a bankruptcy friendly financial institution, one for which is friendly enough to do business with you, your problems may not be completely over with. Certainly, the next step on your credit rebuilding journey revolves around whether or not you’re considered bankable enough to qualify for a financial product. For the most part, you won’t be. But this isn’t to say that you can’t quality for a decent credit card. Ever heard of a secured credit card? Put simply, secure credit cards are designed for individuals who are either: 1) trying to establish his or her credit for the first time; or more importantly 2) striving to rebuild his or her credit following a major financial disaster such as a bankruptcy. How does it work? A bank secured credit card requires a cash deposit to be placed in escrow, which then serves to guard against the risk of default. If some reason you default on the credit card, the banks simply satisfy the balance with the deposit on hand.
Tip #3 Rebuilding Your Credit with Auto and Home Loans…
Typically, mortgages and auto loans are considered to be secured debts, thus are exempt from Chapter 7 bankruptcy proceedings. Nevertheless, for those few consumers who desire for a car or home loan following a bankruptcy, there is even better news: surprisingly auto loans and mortgage are fairly easy to obtain. The reason: in theory lenders of credit are vastly aware that consumers need a car and house but aren’t able to file bankruptcy again for another eight years, thus pose very little risk of default. As an added incentive, each installment payment you make, will serve to increase your all-important FICO scores, getting you bank on track to financial recovery in an expedited manner.
Alas, when dealing with a financial matter as serious as a bankruptcy, it behooves conventional wisdom to become as informed about subject matters important to improving your personal finances as quickly as possible. Case in point: big ticket consumer items such as an auto loan or home mortgage are both apart of what's called the American Dream; thus, for the millions of American consumers going through a chapter 13, or even worse, a chapter 7 bankruptcy, his or her stress level must be quite high. Don't panic! There's light at the end of a bankruptcy's tunnel.
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