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How Can I Rebuild My Credit After Bankruptcy?

Posted By Allmand Law Firm, PLLC || 23-Sep-2015

Many people believe that bankruptcy permanently destroys your credit, but this couldn’t be further from the truth. In fact, bankruptcy may even save your credit in cases where an old debt kept your score down. Now that you have gotten a fresh financial start, there are a number of steps you can take to begin rebuilding your credit.

How Does Bankruptcy Affect my Credit Score?

The purpose of your credit score is to show lenders how much risk they would undertake if they were to loan you money. High credit scores indicate that your debts are paid regularly and on time. Lower scores are a sign that debts are not paid on a regular basis. Naturally, then, it makes sense that bankruptcy would cause your credit score to drop, but this is only temporary. Consider the following tips to begin rebuilding your score.

What Can I Do to Rebuild My Credit Score?

The first thing you should do is obtain a copy of your credit score from one of the three major credit reporting agencies: Experian, Equifax, or TransUnion. Review it carefully and check for any errors. If there are errors, such as a debt that should have been discharged by your bankruptcy, contact the credit agency and work to resolve them.

The rest relies on getting back to basics. Do not be tempted to spend more than you are able to afford. Pay your bills on time and in full, including debts that were not discharged by bankruptcy (like student loan payments, for example.)

One of the biggest mistakes that people can make after bankruptcy, although understandable, is to avoid credit altogether. While it may seem like the better idea to steer clear of any new debts, this will not help you rebuild your credit. Rather than avoiding it, find ways to use credit responsibly and in small measure. One way you can do this is to take advantage of a secured credit card that reports to one of the three credit agencies and make regular, on time payments. Pay off the entire balance each month to avoid having to pay interest and to show lenders that you are not a risk. After a couple of years, this alone could result in a dramatic improvement to your credit score.

Other methods for improving your credit score include opening up a new bank account or applying for a gas card. If you drive a car, gas is a necessity, so it pays to rebuild your credit through this kind of regular purchase. Signing up for automatic bill pay is another great way to rebuild credit because it will ensure that your bills are always paid on time.

It is important to stay patient during this process and to keep up with good financial habits. Make it a point to stay on top of your credit score, checking it as often as once a month. With all of your efforts, you should start seeing that number increase little by little.

Bankruptcy is not a financial death sentence. Rather, it is an effective way for over one million Americans annually to reboot their financial health. When you take the appropriate steps to fix your credit, you can enjoy financial freedom once again.

Are you considering filing for bankruptcy in the Dallas / Fort Worth area? The bankruptcy lawyers at Allmand Law Firm, PLLC are available to answer your questions and inform you of your options. Sign up today for a FREE financial empowerment session by calling us at (214) 238-9608.

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