So you have filed all of your papers with a bankruptcy lawyer and learned that the bankruptcy will stay on your credit record for at least the next ten years and you are feeling a little depressed. Everything in your financial life has been affected including your chances in the near future of getting a mortgage or car with a low interest rate. What do you do now? As odd as it sounds to some people many banks and companies out there want to do business with you, which in turn can help you start your financial life over. Increasing your credit score is not always easy, it is going to take some planning, will power, and even a little hard work. The good news is that it can be done.
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Credit cards may be what put you into bankruptcy in the first place, but now it is your chance to use them to help you rebuild your credit history. I have a close friend who in 2006 declared bankruptcy, but she has worked hard to build up her credit and now has a very good standing with all three of the credit bureaus. Amazingly enough her credit score last time I talked to her is averaging around 730 for TransUnion, Equifax, and Experian, which she thought would never be possible this soon after filing. It is true that she will have the bankruptcy on her permanent record for many more years, but at least she has a chance to get a home, car, or other asset at a decent price sometime in the future.
Throughout this rebuilding process you will want to closely monitor the changes in your credit reports. Many times mistakes are recorded in your credit report, some experts cite studies that say as much as 48% of all credit reports have errors in them that hurt the credit worthiness of the borrower. One of the nice things about some of the laws that have been passed recently is that a free report is available from each of the three credit bureaus on a yearly basis. So make sure you use these free reports to monitor and keep tabs on how your rebuilding process is progressing.
Some Tools You Can Use to Boost Your Credit Score
1) Secured Credit Cards: The amazing thing about these little plastic rectangular items is that they are one of the easiest ways to obtain credit after a bankruptcy. With a secured credit card you basically put a certain amount of money you have towards the card balance, and that is the credit line you will receive. So if you deposit $200 with the bank or financial company on that card then you will have a $200.00 credit line, just like some credit cards you have used in the past. If you make your payments on time and spend responsibly eventually the end result will be a positive impact on your credit score. My friend looked at her credit report six months after getting one of these cards and her score had actually increased by 20 points. What is also nice about the secured credit card is that if you make your payments on time they might eventually switch you over to an unsecured credit card and increase your credit line.
2) Big Box Store Cards: From researching these I have discovered that Harlem Furniture, Lowe's, Menards, etc. might be willing to give you one of their cards even after you have declared bankruptcy, but their cards will definitely have a high interest rate for you. If you buy an item from one of these big box stores you have chosen for their credit card just make sure you pay responsibly and on time. Keep in mind that the final goal here is to show to the credit bureaus and future companies that you can make payments on time and can be trusted with more and better cards.
3) Piggy Back on Someone's Good Credit: What on earth do I mean by that? I will go back to my friend who is married to someone with amazing credit. Because her husband had a great credit score she was able to "piggy back" on his good credit. Which means she was able to become an authorized user on a couple of his cards. She doesn't even need to make purchases using those cards, but the credit bureaus will report that she is in good standing. You don't even have to use your significant other's credit to help yours, it could be a good friend that trusts you and won't mind adding you as an authorized user. At the end of the day there are many tools at your disposable to help you with your newly cleaned credit slate.
Make sure you check on your credit reports periodically and dispute any mistakes that are not supposed to be on there. Establishing your new credit score is in your hands and you are ultimately responsible for proving to the credit bureaus and any creditors that you have changed your ways. With some discipline and hard work you can come out on top again financially, many people have gone down this path before you, and you will soon be ready to join the ranks of credit worthy consumers where you belong.
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