First things first - If you've found your way to this article on purpose, you'll want to take the time to read all of it. Trust me! So you found yourself over your head in debt like so many others have done in recent years. You did your best to avoid a worst case scenario, but despite all your efforts, you still had to file bankruptcy. Relax, you're definitely not alone. In fact bankruptcy filings saw a sharp increase over the last several years, even after the new guidelines were implemented by the government to slow the pace. What's done is done and you'd like to get it past you and get on with your life. So what can you do to rebuild and rejoin the ranks of those with good credit? If you hired a good bankruptcy attorney, he or she was nice enough to give you some good tips on your way out the door. The main thing you need to know is that as bad as your situation may seem, there is life after bankruptcy. You can rebuild your credit, you can buy a car, and yes you can buy a house. Before you head down to the car dealership or mortgage broker, you must understand these important and effective steps to rebuilding your credit. First of all, no matter what you do after your bankruptcy MAKE ABSOLUTE SURE IT DOESN'T HAPPEN AGAIN! With that in mind, here's what you can do to regain your good credit status. Step 1: Make sure your credit report (with all three major bureaus) is accurate. In some cases, a credit report will still show derogatory open/active accounts after a bankruptcy. Most likely these accounts would have been included in your bankruptcy, but "errors happen". Be certain your report is no longer showing active derogatory accounts that were closed as part of the bankruptcy. Otherwise you'll be recording bad credit on top of your bankruptcy (the credit equivalent of committing a crime your first day out of prison). Step 2: Get a credit card. Sure, this may seem like playing with the same fire that burned you in the first place, but truth is - you have to use credit to rebuild credit. You don't need a high limit, which is fine because most people fresh off the bankruptcy bus won't qualify for a high credit card limit anyway. A great resource is www.coolcreditclub.com, a site that provides one-stop shopping for credit cards. Select the section for "Cards for Bad Credit" and take your pick. Your chances of approval are very high and your limit will usually be low (most likely no more than $300 maximum for an unsecured card). Secured cards are also an option on this site. Be sure to get a card that will report your on time payments to all three credit bureaus. Here's the trick! Once you receive your credit card, charge about 15 to 20 percent of your limit. For example, if your limit is $300, charge no more than $60.....then toss the card in a drawer. Make the minimum payments ON TIME EVERY SINGLE MONTH! Once you reach a zero balance, charge up to 20 percent again and repeat the process. If you're thinking "why charge only $60 when you can charge $300", you haven't learned your lesson and you're not ready for a credit card. On the other hand, if you follow this advice, you'll benefit from the fact that part of your credit score is based on your ratio of "actual balance to credit limit". This process takes time, so be prepared to practice patience for at least 18 to 24 months. Step 3: Get signed up for a credit monitoring service such as "Score Watch" at www.myfico.com. This online service gives you ongoing access to your credit report, and your numeric credit score. It also helps you rebuild your credit over time by providing insight to the various impacts certain occurrences (new inquiries, new accounts, late payments, etc) might have on your credit score. If you're still cutting costs to recover, skip this for now, but I highly recommend it if and when you can fit the $9 a month into your budget. Step 4: Be patient. This credit rebuilding process can easily take two to three years, but you'll reward yourself with a credit status much like the one you had back in the good old days. Simply put, if you follow these four steps, you're well on your way to better credit. The important thing is that you start now and that you lose any bad habits that might have gotten you here. I understand, its not always bad habits that drive a person to bankruptcy, but regardless, I like to take every opportunity to say "MAKE ON TIME PAYMENTS EVERY SINGLE MONTH". Earlier in this article I said you can get a car and a house after bankruptcy. The car is often the easy part considering all the car loan solicitations I received shortly after my bankruptcy was discharged. On the other extreme, the reality is that you're in for a two to four year wait for a reasonable home loan. That can be a good thing considering that some people need a "plan" to work towards a home purchase. If a new home is in your sights, use that two to four years to save money for your down payment, pay off any other bills, and get your financial life back in tip top shape. My final piece of advice (if you do buy a home)...get a place you can afford without having to stretch to make your mortgage payment. You'll be glad you did.
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