Filing for bankruptcy can be a scary process, even if you know it is necessary. One of the most intimidating aspects of declaring bankruptcy is wondering what it does to your credit score. You may fear your credit will be in shambles for years to come – or even forever.
While going bankrupt does impact your credit score, you can build it back up and even get it higher than before by following some simple steps. Here are a few pointers for rebuilding your credit following bankruptcy.
1. Get a retail or secured credit card
It may be difficult to get an unsecured credit card while you are in the middle of bankruptcy proceedings or immediately after. This is the right time to apply for a secured card or one from a retail store. Retail cards often have looser requirements, while secured cards rely on upfront deposits to protect lenders. Whenever you get a new card, make sure you keep the balance as low as possible and make payments on time.
2. Think about a secured or credit-builder loan
Many banks and other financial institutions offer special loans for the purpose of building or rebuilding credit. Secured loans rely on some type of collateral, such as a vehicle or funds in your savings account. A credit-building loan involves the lender placing the proceeds in a savings account and only giving them to you once you make all the payments.
3. Ask to become an authorized user on another account
If you have friends or family members who want to help you gain financial stability, you may be able to get them to add you to their credit cards. This allows you to reap the benefits of their credit history. You should only do this if you know the person has a good credit score and is responsible.
With professional help, you can get your credit rating back into a favorable standing after bankruptcy.