Bankruptcy is a legal term that describes the situation of someone unable to pay their debts. It can be a life-changing event. Individuals who struggle to make ends meet may face financial ruin after declaring bankruptcy. Bankruptcy can have long-term consequences, such as lost income, accumulated debt, and lowered credit ratings. However, this doesn’t mean you can’t do anything about it. To recover from bankruptcy is possible if you take the correct steps. Many people are unaware of the steps they need to take to rebuild their life after bankruptcy.
In this article, we’ll talk about the positive steps you can take to recover from bankruptcy and rebuild your damaged credit as soon as possible.
Regain Your Lost Credit
After bankruptcy, all debts and credit history you’ve established in the past will show as resolved by bankruptcy, thus putting you in the position of having to start building a new credit history.
Because of your bankruptcy, you may think applying for new credit will be difficult.
Of course, lenders will see you as a high-risk borrower. The good news is that not all lenders in the market require excellent or good credit.
Other lenders are looking for clients with bad credit or no credit history.
Credit card companies that offer bad credit cards and lending companies that provide bad credit loans can help with your present situation.
Indeed, bad credit cards and loans may come with higher interest rates, lower credit limits, and more restrictions.
Still, if you do your research well, you can find lenders who offer people with bad credit, credit cards, and loans with reasonable rates and terms.
Use A Credit Card Aa Bad Credit Loan To Build Credit
You can start building a new credit history by obtaining a credit card or a bad credit loan.
Use your credit card but see to it that you’ll be able to keep up with your payments.
Make it a habit to pay off your balance each month before your due date of payment.
Bankruptcy- a Lesson learned well.
Practice Good Credit Habits
Pay bills on time.
Take your payment obligations seriously. Remember, this is your chance to prove that you’ve learned your lesson well.
According to FICO, your ability to pay your payments on time accounts for 35% of your credit score overall. Paying your bills on time can help you build your credit score.
Surviving bankruptcy should have now made you more aware of your financial obligations.
By keeping up with your payments, you should notice an improvement in your credit history and credit score after a year or two.
Report your on-time payments to credit bureaus
Ensure that your lender or credit card company reports all your payments to the three major credit bureaus.
Do not use too much credit.
Utilizing too much of your available credit will cause a drop in your credit rating. Use what you absolutely need while keeping enough credit available to cover your monthly expenses.
Get a secured loan if possible.
Secured cards require a deposit and provide more security than unsecured cards do against theft and fraud.
Upgrade to a regular credit card.
As soon as you start making progress, take the chance to inquire from your credit card company if you can qualify for an upgrade to a regular credit card. It will enable you to enjoy lower interest rates and a higher credit line.
It is also a good idea to include a statement that will appear on your credit report explaining what led you to bankruptcy and what steps you have already taken to get out of the situation.
When a lender inquires about your report, they will be able to read your statement, which may increase your chances of approval despite a record of bankruptcy on your credit report.
Establish a budget and track expenses.
Taking control of your finances after bankruptcy can be challenging.
Making a budget and keeping track of the expenses is a good start. This will assist you in staying within your approved budget and making wise financial decisions.
When creating your budget, keep the following points in mind:
- Review your current expenses to identify areas of unnecessary spending.
- Consider what you can cut back on without sacrificing essential needs or lowering your quality of life.
- Set realistic expectations for how much money you will have each month, as bankruptcy may result in a reduction in income.
- Track your progress over time to see if you are sticking to your budget and moving toward financial stability.
Although it can be traumatic, bankruptcy is not the end of the world. The most important thing is to start rebuilding as soon as possible and to keep in mind that life goes on.
There are many resources available to assist you with the process. If you follow the steps in this article, you should be able to recover successfully from bankruptcy.