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Rebuilding your Credit after Bankruptcy

Updated on March 11, 2013


Rebuilding your Credit after Bankruptcy

At last, your bankruptcy is final and you have lifted the weight of debt off your shoulders. But what about the future? Will you ever be able to get credit again? Even though the bankruptcy will stay on your credit report for up to 10 years, there are steps you can take now to start rebuilding your credit rating.

Cut Down on Your Expenses

Keep track daily of where your money is going. You may be surprised to see just how much you have been spending without thinking about it. The cost of soft drinks, a few cappuccinos, impulse purchases and eating out, can add up quickly. If you cut back on some of those expenses by taking your lunch to work, brewing your own coffee or using coupons, you could save hundreds of dollars a month.

Stick to a Budget

Finding a way to control your spending is the only way to keep from falling back into financial trouble. Make a realistic budget and stick to it. Make a list of monthly fixed and variable expenses. Don't forget to include things you pay quarterly or annually, like taxes and insurance and funding for miscellaneous expenses, like birthday presents, as well.

Now look at your income. Hopefully, it is more than your expenses. If not, you will have to make some adjustments and find ways to cut down the expenses you are incurring. Divide the total monthly expenses by 4.25 and that is how much you need to set aside each week for your cost of living. Living on a budget may seem difficult at first, but as you become used to it, you'll feel more secure and confident in your money management skills.

There is "Life After Bankruptcy"

Start Saving Regularly

No matter what excuses you make for not saving, they are not good enough. Learning to save at least some of every paycheck is vital to your financial wellbeing. Emergency expenses, like car repairs, will always arise and wreak havoc with even the most carefully followed budgets. Even if you are only able to save 5% of your paycheck each week, it will add up quickly if you place it in an account that earns compound interest. Commit yourself to making at least this small contribution to your savings account every week and you will be taking a big step towards securing your future.

Start the Rebuilding Process

For the next 10 years, any lender contemplating giving you a loan will scrutinize you very carefully. Starting your savings program and paying your bills on time are the first steps to begin raising your credit rating and making a lender more likely to grant you credit. You will also want to check your credit report and make sure it is accurate.

Once your savings account is established, take out a small loan using the savings account as collateral. Pay it back promptly and you've raised your credit score. You can also obtain a secured credit card by placing as little as two hundred dollars in a special savings account. Make your credit card payments on time and you will have taken another step towards improving your credit score.

Bankruptcy is a fresh beginning if you use it that way. Don't let bad habits follow you into the future. Now that your bankruptcy has been finalized, you'll find that you will begin to receive solicitations from credit card companies and other lenders almost immediately. Proceed with caution and don't fall back into the trap. Your financial future depends on it.


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