Step 1: Make Sure Bankruptcy is the Right Decision
Before going through with a bankruptcy, make sure there are no other options available. Bankruptcy is a very serious affair that affects more than just your personal finances. It also affects your credit report and, in turn, your ability to secure a loan, buy a car and even get a job. If you do wind up going through with bankruptcy, however, there are ways to mitigate the damage.
Step 2: Pay Your Bills on Time
The first thing you need to do after bankruptcy is get into the habit of paying your bills on time every month. Late fees affect credit scores more extensively than many people realize. This is due partly to the fact that a running tally is kept. Over the years, a couple of late fees a year add up. If you’re a forgetful person and are prone to missing payments, consider using stickies or smartphone apps to help you remember to pay your bills on time.
Step 3: Look for New Credit
Some people close all their accounts during bankruptcy. If you do the same, you need to open at least one new line of credit after the bankruptcy. It’s essential that you maintain credit if you want to repair your credit score. If you’re worried about your ability to handle the credit, simply cut up the credit card but keep the actual line of credit open.
Step 4: Consider a Loan
After a few years have passed, consider securing a small loan that you can pay off quickly. Getting and repaying a loan is one of the quickest ways to fix your credit score. It shows lenders that you’re responsible, that you can be trusted with sums of money. If you have difficulty securing a loan from traditional lenders, consider speaking with a local credit union.
Step 5: Watch Your Balances
People usually fall into bankruptcy because they fail to maintain their balances. When this is the case, it’s important to never fall into the same trap again. Closely monitor your balances and make sure you never max out any of your lines of credit. Ideally, you should use your lines sparingly. You should also try to pay back the credit used within 60 days. If you use $500 worth of credit in January, for instance, you should pay it off in full by the end of March.
Step 6: Be Responsible
Repairing your credit after a bankruptcy will take time. However, if you get into the habit of paying your bills on time and watching your balances, you’ll be doing more than just repairing your credit. You’ll be setting yourself up for future financial success. And as your credit improves, you’ll be able to start taking out new loans and accessing new lines of credit. And there’s no secret trick to it. It’s as simple as acting responsibly.