Filing for bankruptcy means you’re free of the financial burdens you may have had to go through. However, if you were eligible to file for bankruptcy, that also means your credit probably wasn’t the best. Rebuilding your credit after filing for bankruptcy can seem almost impossible. If you’re not sure where to start, take these steps to start building your credit in order to reach financial freedom.
Start a Budget
A budget is a financial roadmap that lays out where your money will go. If you have a budget, you’re able to assign your hard-earned income a specific job. Whether that be to build your savings, pay off debt, or for everyday expenses. Creating a budget after you filed for bankruptcy is going to ensure you’re making the right financial decisions moving forward. To ensure your budget is realistic, you’ll need to take a look at your spending habits and see where your money is currently going. That way, you can start to make adjustments to improve your financial health. A great way to track your spendings is by using a spreadsheet, a financial app or even your bank statements.
Your budget should be based on your total income each month. Once you have that number, you’ll need to divvy up your income based on how much you intend to set aside for bills, savings, household items, and miscellaneous items. Avoid making unrealistic expectations and create a plan on how you’ll hold yourself accountable, whether that be setting up autopay or tracking your spending regularly.
Get a Secured Credit Card
Secured credit cards may be the only opportunity you have to get your credit score up. With poor and/or bad credit you may not be able to qualify for traditional credit cards. A secured card is secured by a deposit that you make. For example, if you deposit $300 into your card, that counts as your security limit. If you fail to make a payment they pull the payment from the deposit. Although it may take a while for your secured credit to make an impact on your credit score, it’s still worth the effort.
Overcome Past Mistakes
If you filed for bankruptcy that means you must have an unhealthy relationship with your finances. It’s important that you reflect on your past mistakes to avoid making them again in the future. Some examples of mistakes are: not paying fees on time, a credit card was closed or your credit card balance is higher than usual. Either way, you should take into consideration what your weaknesses and how you plan to overcome them.
Monitor Credit Closely
Checking in on your credit after bankruptcy is absolutely critical to your future financial development. Tracking your progress and forming positive habits to rebuild your credit history is the first step in regaining your stability. When you track your credit closely you’re able to view what purchases may have negative impacts. You gain knowledge of your movements and how they affect your overall financial well being.
If you view any inconsistencies take immediate action to address these concerns. When red flags go unaddressed you expose yourself to a greater risk down the road. Download an app or keep a close tab on your trusted credit checking website to ensure you’re making healthy purchases. Ignoring your finances is easy making it a reason some file for bankruptcy. It’s a high price to pay when you turn a blind eye. Turn your situation around remain closely attached to your credit movements.
Become an Authorized User for an Account
Navigating how you’re going to grow your credit after filing for bankruptcy can initially be tricky. Become an authorized user on a trusted relative or friend account. This means that someone would add you to their credit card account and according to their credit habits you would also benefit positively or negatively. If you seek someone who has a great track record and is on top of their credit card payments this would be highly beneficial in growing your credit.
Getting back on track using this method is easy and can greatly help you grow financially secure. Your pre-existing credit history would not hurt theirs. Choose someone wisely to help you get back on track because if the primary account holder makes sudden bad credit purchases this can further negatively impact you. Consider building your credit this way based on someone you trust and feel secure with.
Open a Secured or credit-builder Loan
If you aren’t sure of opening up another credit card, a secured loan is an option you might want to consider. When opening up a secured loan, you put something down as collateral. Examples include a vehicle or possibly a savings account. Something that can be claimed by a lender if you possibly can’t repay a loan. Make sure to look into any fees, interest rates, and monthly payments before applying for this type of loan.
Another loan you could look into is a credit-builder loan. These loans work differently from other types of loans and are meant to help improve your credit. Credit-builder loans doe not give you money upfront. After applying and getting approved for a loan, the money you borrow is deposited into a savings account that you can’t access. After you have entirely repaid the loan back you then get your money. This is a way for lenders to eliminate the risk of allowing someone with poor credit to borrow a substantial amount. Not meeting the repayment on time may severely hurt you so repaying this loan on time is critical.
Building your credit after bankruptcy comes in many different forms. Make sure to look at the fine details before signing on to a new account and don’t forget to account for interest if you’re opening up a new line of credit. Bankruptcy doesn’t have to be a deterrent for your credit progress. Steer your finances in the right direction, create healthy habits and stick to a plan. Staying consistent with your goals may be the best way to get back into maintaining your finances. When your credit history finally starts to lift off, your vigilance will pay off your past hiccups.