How to Repair Your Credit Post Bankruptcy

From losing a job to losing a home, many Americans have suffered the slings and arrows of the recession over the past few years. This has forced many to make the difficult decision of filing for bankruptcy. While bankruptcy is the least desirable option when in financial distress—leaving a large scar on your credit rating for 7-10 years—it is often the only one left.

Even once they emerge from a bankruptcy, many are still confronted with a long-term impact on their credit rating, making it nearly impossible to find credit at a reasonable cost. According to the credit experts at ApprovalGuard.com, many creditors will not lend to you for one to two years. When you finally begin to qualify again, you will typically be categorized as “extra high risk,” which is often accompanied by lower credit limits and very high interest rates.

The good news is that nothing in credit is forever.
The effect of a bankruptcy on your credit score can start to diminish the day your case is closed. Here are some important post-bankruptcy strategies to follow:
• Plan your credit recovery. Take it slow and easy and do it right; don’t exceed what you can afford.
• If your credit report contains inaccuracies about debt that was discharged through your bankruptcy, contact the creditor or the credit bureaus to request a correction.
• If your problem was over-spending, create a written budget and STICK to it.
• To re-establish a strong credit profile, you need a good history of payments from credit cards and installment debt, such as autos, student loans or a home loan.
• The rebuilding process requires you to use credit responsibly. Use only a small portion (30% or less) of your available credit line and ensure you make a payment every month.
• If your problem was related to medical bills, seek out a solution for insurance.
• Learn more about how credit works through the Internet, counseling services or a service like ApprovalGuard.com.
• If you didn’t have enough savings to survive a setback, get serious about savings for an emergency fund. In the current economy, you need at least 12-16 months.
• When you start to re-establish your credit, consider a “secure” credit card. Such cards are usually backed by your savings account or money you place in escrow to cover 100% of your credit line in case you don’t make your payment.
• You may be able to apply for a home loan in as little as two years after the discharge of your bankruptcy, however, expect to pay higher fees and interest rates.