Steps to Establishing Credit After Bankruptcy
Although bankruptcy can be devastating, there are many ways you can get back on track financially after bankruptcy. The first thing you will need to do is let go of all of the guilt and shame. Anyone can suffer a financial setback, so there is no need to feel guilty about filing for bankruptcy. Below are some of the steps you can take to rebuild credit after bankruptcy and get back on track:
Set A Budget
One of the keys to getting and staying on track financially is to set a budget. You will need to keep track of where your money is going and how much you spend every month. When you are creating your budget, try to find some ways you can trim your expenses. Saving money is essential for getting back on track financially.
Build Up Your Emergency Fund
An emergency fund is a necessity. If one is hit with an unexpected expense, and they do not have an emergency fund, then they may be forced to pay for it with their credit card. Experts recommend having enough money in your emergency fund to cover at least six months’ worth of expenses. Try to deposit some money into your savings account every week. You will be surprised at how quickly you are able to grow your emergency fund account if you deposit money in it regularly.
Get A Secured Credit Card
Many people file for bankruptcy because they have credit card debt that they are unable to pay. However, if a credit card is used responsibly, then it can be beneficial for restoring credit after bankruptcy. You should consider getting a secured credit card. You are required to make a deposit on a secured credit card before you use it. Keep in mind that your credit limit is usually equal to the amount you deposit. For example, if you make a $400 deposit on the credit card, then the credit limit will be $400.
You can use your credit card responsibly by paying the balance off every month. Additionally, you should only charge items if you can afford to pay for them with cash.
Pay Your Bills On Time
Paying bills on time is one of the essential steps for establishing credit after bankruptcy. You get positive reports sent to the credit bureaus when you pay your bills on time. You also show potential lenders that you are financially responsible. Many people notice their credit score improve by several points just a few months by paying their bills on time.
Monitor Your Credit
It is important to check your credit regularly after filing for bankruptcy. You will need to make sure there are no errors on your credit. It is estimated that 25 percent of people have errors on their credit report. Errors on your credit report can cause your score to drop by several points. If you find an error on your credit report, then you want to make sure you report it immediately.
There is often the temptation to try to handle things on your own, but when your finances are at stake it may be the best bet to take on the services of a bankruptcy lawyer, like our team at Herrin Law. We’ll take you through the legal process and ensure you’re set on the right track for a smooth and rapid recovery, and we won’t break your bank doing so! Contact us for a free consultation.