10 ways to reestablish credit after bankruptcy

10 ways to rebuild credit after bankruptcyIt can be a tough uphill climb to rebuild your credit after a bankruptcy. Yet, once you've kicked aside the first hurdle, the rest of the path will open before you. Recovery takes time, but it's not as bleak as you may think.

Here are 10 tips to help you rebuild your credit.

1. Get a savings account. If you are using a cash store to cash your paycheques, now is the time to choose a bank and set up a new savings account for yourself. It's your legal right to have a savings account, and you cannot be refused an account because of your credit history.

2. Make regular savings deposits. Have a percentage of your paycheque deposited into your savings account every two weeks. By building up your savings account, you will be creating collateral that you can use should you choose to sign up for a loan in the future.

3. Seek advice from your banker. Speak to a banker and tell them you are working toward rebuilding your credit history. They can give you some solid advice and are an excellent source of information.

4. Pay your rent three days before it is due. This will give your cheque time to clear. This will also prevent you from forgetting to pay it. Your landlord will be impressed and will give you an excellent reference.

5. Contact the credit bureaus. Explain, in writing, why you declared bankruptcy. Be sure to back it up with reasons why that situation will never happen again.

6. Pay every utility bill on time. This includes home telephone and cell phone bills, cable television bills, Internet service bills and more.

7. Sign up for a secured credit card. This is the same as a credit card, except it is backed up by the money in your savings account. The credit limit will be the same as the amount of money that secures the card. When you make your monthly payment for the card, this payment record will be sent to the credit bureaus each month. A solid history of no missed payments will greatly improve your credit score over the length of 12 months.

8. Keep your credit card balances low. A high balance will negatively impact your rating, which is exactly what you do not want right now.

9. Pay your credit card balance in full. Also do this immediately after receiving the statement in the mail. This is why you needed to keep your balance low, too. A small balance such as $10 is easy to pay, yet is one more step toward improving that credit score.

10. Once you get your first credit card after your bankruptcy, stop right there. You only need one, and paying a monthly balance in full at the end of each month is a whole lot easier when you have little debt.

It may seem like an ongoing battle, but before you know it, you will find a secure financial future within your reach.

Written by Melanie Dixon.
Published August 5, 2009

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