Rebuilding Your Credit After Bankruptcy

It’s okay – start from the ground up!

Bankruptcy can be a scary word, especially for those going through the process. But it doesn’t have to be, and it absolutely shouldn’t make you afraid to spend after you emerge from the process. While it is impossible to rebuild credit overnight, it can absolutely be a liberating experience because you will be doing it debt free. Sure, you will be starting from the ground up, but you won’t be carrying the load you were before.

So what are some of the ways you can rebuild your financial standing after bankruptcy? Check them out here:

Stop feeling down

The first step to rebuilding credit is to stop feeling guilty about previous mistakes. Guess what, everybody makes them. In fact, so many people have made financial missteps that the bankruptcy process had to be created in the first place. But this is not a bad thing. It demonstrates that A) you are human, and B) that you live in a society that is willing to help you out. Both of which are important.

According to Daily Finance, beating yourself up about your past won’t change it, nor will it help you overcome it. Instead, turn to the future and brush it off. You have a clean slate now, with no or minimal debt hanging over your head. Sure, you are going to have to be more careful from here on out, but setting off in a new direction is both a healthy and learning experience, so be confident in this new direction.

Make a budget

Having a budget is so important to keeping yourself in line with spending. There is a good chance that you wound up in bankruptcy in the first place because either you didn’t have a budget in place or you didn’t stick to it. Both are crucial. What good is a budget if you don’t live by it?

Nolo, a source of legal information, noted the importance of writing down your expenses and what you can afford every month. If you are new to this blog, you can see our previous recommendations on how to create a monthly budget here.

It is so important to live within your means and eliminate those spending habits that are holding you back. Have confidence in yourself and take control of your spending by sticking to a firm budget you can be proud of.

Get a secured credit card

There is no way to rebuild credit without using it, and while that might be scary at first, it is the truth. You may think you won’t be eligible for a credit card because of the recent bankruptcy process, but that is not the case, especially with a secured card.

A secured credit card means you establish a limit by depositing that money into an account, as noted by Credit.com. This way, you are doing yourself two favors at once. Firstly, you are planning ahead for finances, which goes back to your newly respected self-budgeting skills. But secondly, you are controlling your credit card spending. Sure, there will be interest fees tacked onto these purchases, but that is part of the rebuilding process. By spending only the money you have, you can help balance your spending and build credit at the same time.

Approach your financial future with confidence.

Make payments on time

Missing payments will hurt your credit score, no matter how you break it down or try to rationalize it. By setting limits and having a budget in place that you follow, this shouldn’t be hard to do. But then again, it is sometimes easy to get carried away or lose track of certain expenses, especially small ones – they can add up.

According to Nerd Wallet, your bill payment activity can be sold to crediting agencies. As you continue to become more confident in your spending, you will no doubt apply for additional credit cards beyond your secured card. If you fail to make payments on time, these credit agencies could make it harder for you to do so. Don’t mess around with late payments or excuses, just pay your bills on time.

Emerging from the bankruptcy process should be a relief, so embrace it. Take control of your finances and have the confidence in yourself to take the right steps and rebuild your financial situation.