Credit Repair after Bankruptcy

Consumers who are forced to declare bankruptcy find themselves wandering a strange and unforgiving landscape when they try to reestablish their credit. Even opening a bank account may be a difficult proposition for those with little or no money to deposit. Fortunately, there are some options for those who land themselves in this dilemma.

Effect on Credit after Bankruptcy

In some cases, it may not be possible to get credit at all for major purchases, such as a car or home. These issues will remain on your credit report for the next 10 years if you filed a Chapter 7 bankruptcy. However, your bankruptcy will often disappear after only 7 years if you filed under Chapter 13 instead. But this type of bankruptcy also requires that you pay back all of your debt within three to five years according to a set payment plan.

Recovering Your Credit after a Bankruptcy

Fortunately, there are several things that you can do to help get yourself back on your feet. By taking the following steps, you can greatly simplify your journey on the road to financial recovery.

If you need to buy a car, have another party such as your parents co-sign the loan with you. This may be able to get you something resembling decent terms on your loan (assuming that your co-signer has good credit, of course.) If credit is not available, then you may just have to go without a car until you can buy one with cash.

If you are currently unemployed, it is absolutely imperative that you get-and keep a job as soon as possible. Finding a good place to live ranks a close second, if this is an issue as well. However, more and more landlords are starting to check credit references as a means of screening out possible unreliable tenants. If you can’t find a decent apartment anywhere, then living with a friend or relative may be your only option until your credit improves. But maintaining a stable residential and employment history is vital because it shows creditors that you are reliable. Like landlords, employers are also examining the credit scores of their potential applicants as a measure of personal responsibility. Those with low scores are often eliminated from consideration. Of course, this can fuel a vicious cycle that prevents you from getting a job that enables you to move forward financially again.

Opening and maintaining a bank account is also necessary. But even banks and insurance companies often evaluate their customers’ credit records before taking on their business. Fortunately, there are banks that offer some sort of second-chance program for bankrupt customers. Keeping a positive balance in all accounts at all times will show employers and creditors that you now have a positive cash flow.

Stay current on all of your monthly bills and other payments, so that your credit record stays clean. Getting a credit card and using it wisely is also smart, as it shows lenders that you can now manage your money. But pay off your entire balance every month (or at least more than the minimum). If you get in over your head again, then your remaining credibility with lenders will be lost.

Getting Financial Help

Although taking the above steps can help to facilitate your future solvency, it may still be wise to visit a consumer credit counselor for further advice or guidance. They are familiar with all of the consumer debt laws in your state and can help you to create a more custom-tailored plan of action to help you get back on your feet.