By the time you file for bankruptcy, your credit will likely have already taken a significant hit. It will drop even further when you file. However, after your discharge, you are in a unique position that allows you to rebuild financially.
Taking the right steps after bankruptcy can be as important to maximizing the benefits you receive from your filing as taking the right steps during your bankruptcy. With the right approach to using credit, you can potentially improve your credit score. You might even achieve a higher score you had before you filed by the time your discharge comes off of your credit report.
Get new credit when the opportunity arises
One of the biggest mistakes you can make after bankruptcy is choosing to just forego credit. If you hope to obtain a mortgage or buy a financed vehicle, starting to rebuild your credit now is important.
Within a few weeks of your discharge, you will likely receive offers for secured credit cards. Although the terms for a secured credit card aren’t the best, it will give you an opportunity to create the longest possible record of credit used. Once you have made a few monthly payments, you will likely be able to qualify for a better card.
Pay revolving credit lines in full every month
You have likely already learned the hard way how easy it is to let your revolving line of credit overwhelm you. Carrying a balance from month to month not only puts you at risk of getting to a point where you can’t pay your bills, but it also means you incur expensive finance charges and interest. Only use your credit card for necessary purchases, and pay it off in full every month.
Try to obtain several different kinds of credit
Ideally, after you have had a secured credit card for a while, you will continue using that card for one or two purchases a month while adding a better credit card to your wallet. You may also want to look into other forms of credit, like vehicle financing or a medical line of credit.
Having several kinds of credit that you make routine payments on and used responsibly will boost your credit score. It’s important to remember that keeping your total balances low boosts your credit score, as does a history of timely payments. The longer accounts stay open, the more they benefit your score.
Within a few years, you may be able to add back a hundred points or more to your credit score. Learning about bankruptcy and about how to improve your credit after filing will ensure you reap the benefits.