Recovering from bankruptcy is a long process that includes several different phases. In our last blog we talked about what you can do immediately following bankruptcy to get back on track. In this blog we will talk about the next step: rebuilding your credit. Here are a few practices that will help you rebuild your credit.
Dispute Inaccuracies on Your Credit Report
If you’re following our previous blog, you should be monitoring your credit report. As you monitor this report, it is important to watch out for inaccuracies. If a company is submitting inaccurate information to your credit report, you have the right to dispute it in order to keep your report clean. In order to dispute errors, you’ll need to write a letter to the credit bureaus that details the inaccurate information and why you believe it to be inaccurate. Further information on disputing errors and contact information for the credit bureaus can be found here.
Remember that having just been through a bankruptcy, you may be contacted by companies offering “credit repair” services that can remove items from your credit report. These companies are illegitimate and should be avoided. No business can remove accurate items from your credit report and you can easily dispute inaccurate items yourself.
Apply for a Cell Phone Plan
Once you can, get your own cell phone plan. During your bankruptcy, someone may have helped you with a cellular plan or you may have gone without a monthly phone plan, but getting your own plan is an easy way to start rebuilding credit. Cell phone plans can demonstrate your ability to make monthly payments on time. Just make sure you have enough room in your budget to make payments. If you miss a payment, your carrier may report it and it will show up on your credit report.
Apply for a Secured Credit Card
Secured credit cards are designed for people with bad credit who are working to rebuild their credit. These cards work differently than traditional credit cards in that you provide the bank with a security deposit for your line of credit. This can be a specific deposit the bank will keep or you could use your savings account. The bank will extend a line of credit for the amount you secured, and in the event you fail to make a payment, will take money from your deposit. Making these payments needs to be a high priority as they improve your credit, and missing a payment will have a negative impact on your credit score.
Apply for an Unsecured Credit Card
After a couple years of making reliable payments on your secured credit card, you should be able to apply for a regular credit card. Look for a credit card that has reasonable interest rates. Some lenders may have high interests rates because of your bankruptcy, but many lenders will treat your bankruptcy as a clean slate, and, with reliable payments on your secured credit card and cellular plan, should offer you reasonable interests rates. Look for these types of lenders when applying for an unsecured credit card.
You will not have a failsafe with this card like you did with your deposit from the secured card; paying your unsecured credit card payments should be your highest priority. Like the secured credit card, missing a payment will negatively affect your credit score; but unlike the secured card, you’ll be in debt until you make the payment.
Following these practices will help you rebuild your credit and ultimately recover from a bankruptcy. Next time, we’ll go over things you can do to maintain your good credit, so check back soon.