Nothing destroys a credit score like bankruptcy. Financial hardship does not have to mean the end of any chance you had of having a favorable score. There are actions you can take immediately to begin recovering from bankruptcy.
Obtain Your Credit Score
Look to obtain your credit report first. You can use Credit Karma as it’s free to use. You need to make sure that everything is present and correct. Any errors or inconsistencies you can pick out will give you a head start on repairing your poor rating. There are no guarantees you will find anything, but it is worth a try.
Pay Bills on Time
35% of your credit score is determined by your payment history. That’s over a third of your overall report for such an easy thing. Set up a direct debit from your account so every month your bills are automatically paid. You could even download some helpful apps to notify you when your bills need to be paid.
Apply for Credit
Always carry a credit card and use it where possible. You are not charged if you pay off the balance in full at the end of every month.
Just make sure you do not apply for too many cards, or cards you are not going to get. After bankruptcy, the chances are the only card available to you is a secured one.
Avoid Closing Accounts
Closing off credit in the aftermath of bankruptcy is a tempting option. This actually causes more harm to your credit score than you think. By closing off your access to credit, you have the same problem as someone without a credit history.
As an alternative, cut up the cards. That way you can keep your lines open without formally closing your account.
Build on Loans
A year or so after bankruptcy you can begin to take out some loans again. This is vital to repairing your credit score. Consider a car loan or some other medium-term loan. The interest rates at this stage won’t be favorable, but as you make the repayments they’ll get lower with every new loan.
Just make sure you speak to a financial adviser before taking out any loan. You need to ensure you can make the repayments in the long-term. Lindgren offers personal loans for bad credit and is a great place to start.
Beware of Credit Repair Services
Finally, beware of companies promising to repair your credit. You are perfectly capable of doing this yourself without paying any high fees. Moreover, all they’ll do is advise following the same tactics as above. Know your limits and only take credit you know you can handle.