How to Rebuild Your Credit After Bankruptcy
While bankruptcy can be a lifeline for people in the most dire of financial situations, it also carries with it a great deal of difficulty as well. Most people are aware of the financial repercussions of bankruptcy, but what many people are unaware of the emotional distress that bankruptcy can cause. While you may feel that bankruptcy relegates you to a financial leper, and the idea of rebuilding your credit after such an ordeal seems insurmountable, picking up the pieces after bankruptcy may not be as difficult as you think.
The first step in recovering from a bankruptcy has little to do with a tactical approach to your personal finances. In fact, it has more to do with your mental and emotional well being. There’s a great deal of shame and sometimes guilt associated with filing for bankruptcy.
In 2010, there were over 1.5 million people who filed for bankruptcy. In a survey conducted in 2011, over 13% of Americans admitted that at one time or another they considered bankruptcy as a viable option. If you’ve filed for bankruptcy, keep in mind that you’re not alone and that many people suffer sometimes-unavoidable financial issues that cause them to turn to bankruptcy.
The next step in picking up the pieces after a bankruptcy is to have a proper perspective on your past failings while moving forward. Asking yourself questions such as what led to you to bankruptcy, what you could’ve done differently to avoid bankruptcy and what you have learned through your bankruptcy experience will help you to avoid financial difficulties in the future. Letting go of the negative emotions of a bankruptcy as well as understanding how you got there is a strong foundation for rebuilding your credit after a bankruptcy filing.
The next step is where the rubber meets the road as it relates to your finances. It’s possible that your bankruptcy resulted from living outside of your means. Indiscriminate spending, a family emergency or even a medical emergency may have spurred this on. Regardless of the reasons for your financial woes, it’s time to begin living within your means. Something as simple as establishing a budget and paying your bills on time each month is the first tactical step in recovering from a bankruptcy.
Once you have gotten your personal finances under control and you’re in a steady habit of paying your bills on time each month, then it’s time to begin considering rebuilding your credit. This can be done through several different methods.
There many credit cards available to people who are looking to either establish or rebuild their credit. The interest rates may be high and the credit limit may be low but this will help you to reestablish your personal credit worthiness.
It’s also important to know what to avoid. An example of this is a payday loan. These loans can be extremely beneficial to many people but the debt can get out of hand rather quickly and it’s best to avoid these types of lending institutions if at all possible. What’s more, payday loans do nothing to benefit your credit, as your repayment will not be reported on your credit report.
Another excellent way to rebuild credit is if you need to get a loan for a car, purchase your car from bankruptcy friendly car dealers and lending institutions. These companies work with people with various credit scores, just ensure the lender reports to the major credit agencies so your good standing benefits your credit score.
Bankruptcy is becoming a common thing in today’s society, but that doesn’t mean that it’s any easier to deal with both financially and emotionally. If you follow some simple steps that deal with the very real emotional and financial repercussions of bankruptcy, you’ll find that you can put the pieces of your financial life back together in an effective and methodical manner. There is life after bankruptcy—that much you can be assured of.