Michelle Davis is an Associate Editor with http://www.ovlg.com/. She is also a small time entrepreneur, financial advisor and guest author for acclaimed blogs. Michelle has been writing for more than five years and helping people to get wise with their money. Her interests include attending financial seminars, writing columns and visiting personal finance blogs.
The recent financial meltdown has accelerated the bankruptcy rates in the U.S in a major way. Millions of Americans are drowning in consumer debt and resorting to bankruptcy. A report from American Bankruptcy Institute says that more than 1.5 million people filed bankruptcy in 2010. Sounds scary, doesn’t it? For a large number of people, bankruptcy is the only way out but they are extremely concerned about the effect of this debt relief process on their credit score. Actually, they have reasons to get worried because bankruptcy can substantially damage your credit. It will stay on your credit report for 7-10 years depending on the kind of bankruptcy that you have filed. However, it is possible to fix your credit within a reasonable time span with a proper strategy. Here are a few tips which would help you to rebuild your credit score after bankruptcy:
To start with, get a free copy of your credit report from annualcreditreport.com and check your credit report for errors. In many cases, your credit report may not show the discharged debts as closed accounts. This can happen if the creditor does not update the credit bureau about the recent developments.
When you file bankruptcy, most of your debts are discharged but you would need to pay the remaining ones. Check your credit report to know the open accounts and start paying them off immediately. This will start the credit building process.
You would need to open new lines of credit in order to rebuild your credit score. Credit cards can help you with this. However, it can be quite difficult to obtain normal credit cards right after bankruptcy. Nonetheless, you can apply for secured credit cards. With this kind of credit cards, you would need to deposit a specific amount of money to the credit card company. Secured credit cards have the same features of a normal credit card. If you can manage to use the credit card for a certain period of time with no defaults, the credit card company will return your deposit. Secured credit cards are a great way of boosting your credit score.
You can also opt for a store card. It will be relatively easier for you to obtain store cards than credit cards. Using a store card in a judicious manner can certainly help you to improve your credit score. Financial experts recommend people to keep a store card as well as a secured credit card in the post-bankruptcy period.
Trying for a car loan or a small personal loan can be another smart move. These loans are easily available. Personal loans, along with store cards and secured credit cards can help you to fix your credit. This is because you need revolving accounts as well as installment accounts for a decent FICO score.
It is definitely possible to rebuild your credit score and become credit worthy even after filing bankruptcy. If remember the above points and develop some financial discipline then your credit score would be back to normal over a certain period of time.
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