One of the common myths surrounding bankruptcy is that it ruins credit forever. It’s normal to lose points on a credit score after filing for bankruptcy. You can recover them with time.
Here is how to rebuild credit after bankruptcy:
Apply for a new line of credit
Although getting a loan after declaring bankruptcy sounds contradictory, it’s necessary for rebuilding credit. But be careful about the line of credit you choose.
Secured credit cards are easier to qualify for with a lower credit score. Your payment history will be reported to the major credit bureaus. If you make consistent payments, your score will improve over time. Confirm that your chosen secured credit card reports to the credit bureaus beforehand, as some don’t.
A credit-builder loan is another option. Unlike traditional loans, with credit-builder loans, the lender holds the money while you make payments. When you pay the principal and interest on the loan, the lender will release the loan to you. Your payments will be reported to the credit bureaus.
Get a personal loan with a co-signer
You can cover some of your expenses after filing for bankruptcy with a personal loan. And simultaneously improve your credit score.
Since most lenders will decline to give you a loan, you may need a co-signer. The lender will consider the co-signer’s credit score. If they are creditworthy, you will receive the loan. Repaying the loan on time will benefit you significantly.
Check your credit reports frequently
After declaring bankruptcy, you should examine your credit reports frequently for errors, such as your credit score not improving as expected. If you notice any issues, report to the respective agency immediately.
With legal guidance, you should make informed decisions when declaring bankruptcy to avoid moves that can negatively impact your ability to rebuild credit.