Life After Bankruptcy

Rebuilding Your Good Credit

Yes, there is life after bankruptcy and it is easier to repair your credit following a bankruptcy than you might think. The bad news is that a bankruptcy will remain on your credit history for seven years and there are many lenders who will use a bankruptcy as the sole cause for rejecting credit. The good news is that there are several action steps you can take to rebuild your credit and your most recent credit history generally counts more in the minds of lenders than older entries on your credit report.

First Important Steps

The first, and probably most overlooked, step to take is to reevaluate your credit choices. Usually people find themselves in a bad credit situation by making several,seemingly innocuous at the time, credit choices. The live now, pay later mentality is easy to succumb to but invariably has negative effects on ones financial well being. Take a cold hard honest look at the steps you've made to get yourself into your predicament and make a conscious effort to change your behavior. This, obviously, entails paying your bills on time but equally important is to refrain from overextending yourself.

How to Establish New Credit

Establishing new credit is an essential step in the credit repair process. There are several ways to establish new credit even with a poor FICO score. Obtaining a secured line of credit or credit card from your bank and/or credit union is the easiest. This is done by depositing an amount of money, which acts like collateral against a credit card with a limit equal to the amount you deposited. Other fairly easy sources of new credit are department stores, furniture stores, home electronics stores and various retail outlets such as Walmart or Home Depot. These retailers are generally more lenient than most lenders in that by extending credit to you they are almost assured of gaining you as a regular customer.

The Long Term Wining Strategy

Wherever you obtain credit make sure to only make nominal purchases, so as not to overextend yourself, and pay off the balance in full each month. Do not make a purchase of an entire living room set, but rather buy a small item such as a lamp or rug. This is extremely important particularly if you obtain several new sources of credit at once. Keep all your balances small, pay each of them off in full each month and you will be building multiple positive entries to your credit report each and every month. The other thing to consider is that lower balances on your outstanding loans will also raise your score. An outstanding balance of 10% or less on a line of credit looks very attractive to potential lenders. And the amount of interest you pay each month will be less as well.