Bankruptcy is a complex legal process that can affect your reputation seriously and adversely. It won’t last forever on the brighter side, no matter how much damage is done to your credit.
It remains for seven or ten years on your credit report, but its effect diminishes as time goes by. Meanwhile, by taking some constructive steps, you can start improving credit right away.
Each positive mark on your report starts to increase your credit score. With better rates and conditions, you will be eligible for new loans, credits, and mortgages. Five tips and tricks for building credit after bankruptcy are presented here.
Make Timely Payments
Rather than rushing to get funds right away, concentrate on making prompt payments every month on current loans or credit cards to rebuild your credit. Payment history accounts for 35% of your FICO score.
One of the easiest ways to improve your credit is with on-time payments. New loans and credit card applications can also cause tough inquiries on your credit report, further decreasing your score.
Every credit inquiry or rejection on your credit report will negatively affect your credit score, making it much more challenging to restore your credit after a bankruptcy. Focus on making prompt payments to your existing accounts before applying for new funds to raise your credit score.
Build An Emergency Fund
Because all of your debt will likely decrease following a bankruptcy, it’s the right time to start building up your savings. You eliminate the need to apply for loans by putting a part of your income in a savings account or cost-cutting on non-essential subscription or membership services.
Loan applications could take you back into debt if you can’t keep up with the high-interest rates on bad credit. Without an emergency fund, falling into the same debt perils which induced bankruptcy, can be easy.
After removing your debt payments as part of the bankruptcy process, ensure you create a budget depending on your earnings and remaining expenses. Your new budget must include building an emergency fund.
Monitor Your Credit Report
Review your reports regularly for any errors or incorrect data. You can report it to the appropriate credit reporting agency if you find any inaccuracies, such as a delinquent account that does not belong to you.
Your credit score is likely to rise when the net negative effect is removed. A low credit score can be caused by inaccurate information on your credit reports. Numerous credit card companies deliver constant updates to monitor your credit score.
Keep Up Payments with Non-Bankruptcy Accounts
Know which accounts weren’t closed after you filed for bankruptcy. Bankruptcy shuts much of your debt, but there is usually some debt leftover, including student loans or alimony payments.
Fix your post-bankruptcy credit by paying those balances down. This reduces your debt-to-revenue ratio and should improve your credit.
To accelerate progress, when possible, pay more than your minimum monthly payment. Making payments on time is essential to establishing good credit.
Avoid Job Hopping
Job hopping doesn’t affect your credit score explicitly but can impact lenders. They would like to know that you have a secure income and can pay back the debt.
A lender will consider your income, job background in the past 24 months, your credit score, and other factors when reviewing your application for new credit or a loan.
Having a stable job works for you, strengthening the trust the lender has in your capability to pay back your loan even after bankruptcy.
There’s no smart trick after you file for bankruptcy, which makes your credit bounce overnight. Building great credit takes time, but it will help you speed things up by comprehending what goes into your credit reports and scores and following these credit building tips.