Bankruptcy is probably one of the most unfortunate events a person can experience. However, it can happen, and it does not have to devastate you. When there is too much repair work you must do to improve your credit, you’ll probably need to take some extra measures to recover from the consequences. That, however, doesn’t mean that bankruptcy cannot be overcome.
Restoring someone’s credit after such an event can be challenging, but it is not impossible. According to financial professionals, it takes about two to three years to recover after bankruptcy, if you are disciplined and determined enough.
This article will discuss some tips that will help you.
1. Check Your Credit Report
Your credit report includes the financial information you need. Lenders use this information to determine whether your credit is worthy or not. This information includes your balances, payment history, credit accounts, and other diminishing items you might have.
By checking your credit report, you will also get a detailed summary of your debt and account totals, including your personal information. You should check your free credit report with one of the online tools available which will basically do it for you.
Make sure your bankruptcy is included in the debt part of the report. If your debt shows unpaid, you might get in real trouble by hurting your credit score even more. Your attorney must do a credit update to help build an accurate credit report post-bankruptcy.
It’s like getting assignment help, only more specific, and applied to the financial world. You could also check with them if you need to understand the process step by step.
2. Monitor The Credit Report
Many of the free online tools, such as Experian, will help with this as well. They offer free credit monitoring – a program that sends you notification and alerts when credit changes occur.
Monitoring credit reports can help you identify fraud, make new credit inquiries, stay updated on the latest ones, access public records, and open new accounts. It will also help you pay bills on time and engage in more responsible behavior. Reminders and alerts will definitely do the job.
3. Do Not Delay Payments
Your payment history accounts for 35% of your credit score, so making payments on time is crucial. On-time payments can help you avoid bankruptcy, so if you’re experiencing it, it means financial responsibility should be on the forefront of your mind.
Waiting to pay your bills will stall the score-building process and influence it rather negatively. Make sure you prioritize – the first things to consider are cell phone bills, medical bills, and mortgage. If, after the payments, you’re short on money, it means you should cut down on your expenses. This brings me to the next point.
4. Afford Your Payments
You should not be consuming high-luxury goods and services if you are barely able to make payments on time. This might sound extreme, but when circumstances do not permit you, do not continue your Amazon or TJ Maxx (shopping) subscriptions.
First, you have to make serious payments on both monthly, and second, you will be more prone to go over the credit limit once again. Just take a break from the payments that you cannot make and enjoy the freedom of not being in debt.
Worrying about how much you can afford on clothes after ordering $1,000 worth of them will not solve your problem.
5. Don’t Fall For The Scams
Some credit repair companies will promise to help you out when, in fact, they will rip you off. Make sure you stay aware of the possible dangers. Most of their offers sound tempting, yet they are nothing but bate. Some of them are the real deal, but most are scams that most customers cannot identify.
Some of the signs that you might be the subject of a scam include:
The company wants you to pay for their service upfront before offering you anything, not telling you anything about your legal rights, asking you not to contact your credit card agency, advising you to lie on your credit/loan application, or claiming they can build a new identity for you.
Falling for these scams can bring about serious trouble, including prison, so be aware.
6. Be Safe And Sound
One of the best options for building up your credit again is getting a secured credit card. This way, you will be able to use money as collateral by paying a deposit to your lender. For most lenders, this fee is $200 or more. Your deposit will constitute your credit limit, while the card will work like any other credit card.
You will afford to make minimal purchases every month to pay off the minimal debt that you’ve created. This way, you’ll keep away from spending more money than you have on things you don’t need.
7. Get A Normal Credit Card
If you cannot apply for a secured credit card because of your debt, you can always apply for a regular or normal credit card with poor credit. There might be a serious fee attached to this investment, so make sure you check all the details before making any commitments.
Your new regular card should be used for the sole purpose of rebuilding your credit score. This means that your balance must stay low and your minimal expenses should be paid off in due time. Make sure you are not paying any interest to improve your score.
8. Map Out A Budget
The next thing you want to do to prevent bankruptcy from happening ever again is to map out a budget. Most of the time, people end up completely bankrupt because they cannot follow a strict budget. This is exactly what you must do to ensure that what you’ve experienced won’t ever occur.
Your budget should help you make on-time payments and control your spending – at least if you stick to it. Being an impulsive shopper can be a serious problem in this situation, so, if you are one, make sure you close all the possible ways in which you could shop compulsively. Then, be strict about following a budget.
9. Start Saving
Now that you’re starting to recover from the bankruptcy and are following a clear budget, it is time to start saving. You could think about an emergency fund as something that might save you in times of trouble, such as, let’s say, another bankruptcy.
It would help if you aimed for a fund covering about four to six months of your monthly expenses. Do not get discouraged if you won’t be able to save fast. An emergency fund might take about one to two years to build up.
10. Be Prepared For Hard Times
If your debt persists, it means that you are possibly never going to recover from bankruptcy. Your entire life could be supplemented by this debt, which can be extremely uncomfortable. To evolve and become free, you must learn some lessons from the things that happened to you and the actions that you took to solve them.
So, even if you fail – and might shop compulsively when in debt, for example – that doesn’t mean that you should give up on all your efforts. Try again, and this time, think of the consequences of living such a restrained life.
I hope these tips helped you in solving your problem and recovering after bankruptcy. Don’t forget to stay positive and optimistic about what will follow – even when challenging times hit us, we can get past them with the right mindset.