How do I rebuild my credit after bankruptcy?
The Yahoo answer points out that chapter 7 bankruptcy filings stay on your credit report for ten years (and no, there aren't any magic ways to repair your credit report sooner, regardless of what scammers tell you). However, the Yahoo Finance team says that once you've filed bankruptcy you're actually less of a credit risk because you have less outstanding debt. I'm not sure I completely agree, because offsetting your lowered debt is the fact that you've defaulted on some of your debt, which must surely put some credit granting institutions off at least a little bit.
Be that as it may, their suggestions for ways to rebuild your credit history are good common sense and worth listing here too:
- Apply for a secure credit card (and you can learn tons about different kinds of credit cards at college finances.com). Secured credit cards act more like debit cards: you pay money into the credit card account in advance of your expenditures, and your "credit limit" on the card always matches the amount that's remaining in your account. Kind of like a calling card, if you're familiar with those.
- Get a small loan of some sort - perhaps having a good friend co-sign so you can quality post-bankruptcy. Then, obviously, make darn sure that you make every payment, and make them all on time. Even if it's just for a few hundred dollars, a positive loan repayment record can go a long way to proving that you've become a good credit risk. And be leary of loan fraud, because it's out there.
- Open a savings account. Hopefully you already have one, but if not, go and get one started. Then auto-deposit a percentage of your paycheck into the account each pay period and forget about it. Don't think about that account as helping you with a large purchase, just let it slowly build up. A suggested percentage to deposit: 3%-5% of your check.
- Get a car loan or mortgage: if you can afford it, a more common loan like a mortgage is really the best way to rebuild your credit history, and a history of on-time payments on a mortgage is one of the best ways to demonstrate your new financial management capabilities, which directly improves your credit rating too.
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