After making the difficult decision to declare bankruptcy, people must now look forward to the recovery process. Bankruptcy looks bad on a credit report, but methods exist that help people rebuild their credit after bankruptcy. Here are just a few tips that will help people re-establish their credit after bankruptcy.
Secured Credit Cards
One effective way to begin developing credit after bankruptcy comes in the form of secured credit cards. These require a deposit into a savings account to match the credit limit on the card. This protects the card issuer while giving the cardholder a chance to build credit. Applicants for secured cards should shop for the best deal because many come with hefty fees. They should also balance the cost versus the opportunity to get an unsecured credit card in the future.
Unsecured Credit Cards
Many people receive offers for unsecured credit cards as they emerge from bankruptcy. Many cards charge expensive fees for the privilege of having a card without a deposit requirement. As with any other loan, applicants should verify that the card provider reports results to all three credit bureaus. No one should pay the extra cost of these cards without receiving the benefit of improving their credit score.
Start Saving Money
Building a savings plan will help anyone build a stable future, but especially those who look for a new start after bankruptcy. Savings accounts with enough money in them can provide collateral for a personal loan which will boost the credit standing of borrowers who repay the loan according to terms.
Apply to Banks and Credit Unions
After bankruptcy,affected people will experience many rejections when applying for credit. Rather than settling for expensive finance company loans, borrowers should keep working with banks and credit unions to find a way to get a loan. Although other types of credit aid credit recovery,loans from traditional financial institutions help signal a re-established credit history.
Adopt a Credit-Free Life
Reestablishing credit exposes borrowers to the same potential pitfalls that first caused problems for them. Many people see the post-bankruptcy life as a chance to live without credit. Such a lifestyle makes renting cars, buying plane tickets and shopping online challenging, but offers a feeling of freedom and security that many bankruptcy survivors recommend.
After bankruptcy, most people see credit from a new perspective. They strive to pay their bills on time, avoid unnecessary debt and live a more disciplined life.