Bankruptcy can be the beginning of a fresh start if you take the right steps to rebuild your credit. While it might seem daunting, you can gradually improve your creditworthiness and regain control over your financial future.
There are a few steps to help you rebuild your credit after bankruptcy.
Understand your financial situation
Rebuilding your credit after bankruptcy starts with understanding your financial situation. Build a budget that details your income and expenses so you can see where your money goes and easily determine how much you can afford.
Build an emergency fund
A financial safety net helps you avoid falling back into the same financial difficulties you experienced before your bankruptcy. Set aside a small amount from each paycheck until you have an emergency fund established.
Get a secured credit card
A secured credit card can provide you the opportunity to rebuild your credit responsibly. It uses cash as collateral, making it more accessible for those looking to improve their credit. Use it responsibly by making small purchases and paying it off each month. This shows responsible credit use.
Pay your bills on time
Your credit history largely depends upon your payment behavior. Making timely payments shows responsibility and consistency, both of which help to improve your score.
The U.S. court system recorded nearly 400,000 non-business bankruptcy filings in 2021. Before you file, make a plan to start rebuilding your credit so that you can improve your financial position. Planning ahead with responsible financial behaviors will help you recover from the credit effects of bankruptcy sooner.