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Gail Schoeneberg

RE/MAX Integrity

How to Rebuild Your Credit After Declaring Bankruptcy

If you’re buried in debt that you can’t repay, declaring bankruptcy can allow you to start over with a clean slate. It can also lower your credit score and make it difficult to access credit in the future. With a strategy and dedication, you can rebuild your credit and achieve your financial goals.

See Where You Stand
Start by taking a realistic look at your current situation. Obtain copies of your credit reports to see how your financial struggles have affected your credit scores. Knowing your credit scores can help you see how much work you have ahead of you. If you find any errors on your credit report, dispute them so they don’t drag your scores down further.

Make a list of all your monthly expenses, including your mortgage or rent, utilities, car payment, personal loan, childcare and any other recurring obligations. Include estimates for food, gas, clothing and any other regular expenses. Add up all your costs and compare the total to your monthly net income. If your expenses are greater than your earnings, look for ways to cut costs and/or increase your income. Create a budget to guide your spending and set aside some money for an emergency fund.

Strategies to Rebuild Your Credit
Some financial institutions offer products that are designed to help people in situations like yours rebuild their credit. You can consider a secured loan, which would allow you to borrow against money you have deposited in an account, or would loan you money to be placed in a savings account that you could access after making payments. Another option is a secured credit card with a credit limit up to the amount of money you have deposited in an account.

A family member or friend might be willing to co-sign a loan or credit card to help you rebuild your credit. Before you ask someone to do that, be sure that you would be able to make the payments on time. If you couldn’t meet your obligations, the other person would be financially responsible. If he or she agreed to co-sign to help you and then wound up falling behind on bills, going into debt, facing a lower credit score, or not being able to secure credit needed for his or her own purposes because you didn’t live up to your end of the bargain, it could cause severe damage to your personal relationship.

After you have obtained a loan or credit card, be careful how you use it. Keep the balance low and make payments on time. Doing those things consistently will help you gradually increase your credit score until you can qualify for an unsecured loan or credit card.

A Fresh Start
If you’ve declared bankruptcy, look at it as a new beginning. Assess your current situation, make any necessary changes and find ways to rebuild your credit. If you have a sound strategy and stick to it, you’ll be able to get yourself back on track.