How to Rebuild Your Credit Fast After Bankruptcy

Bankruptcy may feel like a devastating blow to your credit history, but it's not the death knell that you might think. It's absolutely possible to build credit after bankruptcy, and if you manage your credit wisely, your credit score could be better in the future than it was before your bankruptcy occurred. Don't avoid thinking about your credit after filing bankruptcy, but instead focus on ways to establish credit after bankruptcy.

Common Misconceptions about Bankruptcy Credit Repair.
First, all is not lost. Contrary to popular belief, you don't have to write off your credit indefinitely after filing bankruptcy. While bankruptcies may remain on your credit report for up to ten years, it's possible to immediately improve credit after bankruptcy. By managing credit responsibly, you may qualify for unsecured credit cards after bankruptcy and even get decent rates on home and auto loans. The first step to repairing your credit after bankruptcy is to pay bills on time and establish credit with new credit cards.

Get a New Credit Card.
Many lenders specifically target credit card offers to people who have just filed bankruptcy. These lenders traditionally charge high interest rates and numerous 'account administration fees' in lieu of offering you an actual secured credit card. While these cards wouldn't even be worth considering if your credit score was high, they can provide a convenient way to begin rebuilding your credit. Use your new credit card responsibly! If your bankruptcy stemmed from poor spending habits, set a budget and stick to it. Never use your new credit card to purchase anything you couldn't afford with your cash income. These unsecured credit cards after bankruptcy usually feature a low credit limit, so it's difficult to get yourself into too much trouble if your credit management skills haven't improved. The point of the exercise is to build credit after bankruptcy, though, so learning to manage your credit responsibly is an absolute must.

If you find that you are unable to get an unsecured credit card after bankruptcy, apply for a secured card. A secured credit card requires you to pay a specific dollar amount before they issue the card, and that payment becomes your credit limit. If you ever default on your card, the issuer may take your security payment as repayment of the debt. Secured credit cards are a much lower-risk for the lender, so more credit card companies are willing to extend secured credit cards to people with recent bankruptcies. If you can't get an unsecured credit card after bankruptcy, look for a secured card to begin rebuilding your credit.

Be careful about applying for credit cards after bankruptcy. If your credit report shows a high number of inquiries, your score goes down and lenders are less willing to risk extending credit. When they see many credit inquiries, lenders often assume you're in financial difficulty and you're a bad risk. Generally speaking, it's best to wait for a pre-qualified offer to arrive in your mailbox or look for products that specifically advertise as post-bankruptcy credit cards. The rates are often higher, but you'll have fewer inquiries on your credit report and won't risk damaging your score further. Credit card rates at this point are a secondary consideration, because you should pay your credit card balance in full every month. It's unnecessary to carry a balance from month to month, so don't do it and avoid the high interest penalties. Don't spend more than 30% of your credit card limit. Lenders want to see you using credit responsibly; they don't want to see you using credit in a way that implies you have no cash, because you become a bad risk with that spending pattern.

Beware of Bankruptcy Credit Counselling Services.
Many consumers feel overwhelmed by filing a bankruptcy and the steps necessary to build credit after bankruptcy. Bankruptcy credit counselling services count on this mentality, and use it to lure you into paying for unnecessary services that won't improve your credit. A good way to determine whether a credit counselling service is focused on helping you or turning a profit is to find out whether it is a for-profit company or a non-profit organization. Non-profit organizations often direct you to good resources, but don't do the work for you, while for-profit companies charge for services that don't really help your credit.

The Next Steps to Improve your Credit after Bankruptcy.
Establishing a new credit card and paying your bills on time is only the first step to establish credit after bankruptcy. If you want to build credit after bankruptcy, there are a number of additional steps to help you achieve this goal fast. If you want to learn how to remove bankruptcy from your credit report, correct errors that will immediately improve your credit score and find out how to take the steps yourself that credit counselling services charge for, subscribe to our free credit secrets newsletter or check out the Credit Secrets Bible today.