Building your Credit After Bankruptcy

If you are considering bankruptcy but are afraid of how long it will take to build your credit back up afterwards, do not fear. The process may take some time, but it can be done in a shorter amount of time than you think if you are willing to take a few steps out on the limb to get there.

After filing for bankruptcy you will be given a clean slate with your finances for the most part. This may put some extra money in your pocket rather than being burdened with too much debt. You can use this extra money to get a prepaid card or secured credit card. You will deposit money in an account and be able to use your card to withdraw from that account. You will have to deposit more money regularly to keep it from running out. Even though you are using your own money instead of borrowing from a bank, this can help you get back in the game of making payments. While a prepaid card will help you learn to control your spending habits and is easier to get, it will not necessarily help your credit score. A secured card from a bank will increase your credit and do it quickly if used properly. The best thing you can do is to keep increasing the limit or your deposit on hand in the account and pay promptly. There are fees attached to this method and you should read the fine print carefully. Some prepaid and secured cards charge less than others. Do your research before deciding on one.

Most secured cards can turn into unsecured cards in about a year of regular monthly on-time payments. You will have to ask for this graduation when you feel you are worthy. Unsecured means you no longer have to use your own money to borrow from. Now you will use the bank’s money. These cards will also build your credit up faster than a secured card.

Many banks will offer low limit unsecured cards to people with bankruptcies on their record. Most will have an annual fee attached and the interest rate may be quite high to start. It is best to start with a $300 to $500 credit limit and use it wisely. Paying off the balance monthly will help you to build your credit more quickly than making payments. It will also save you from paying the bank a huge amount in interest. As you build your credit the bank will gladly increase your credit limit. You should still try to keep your balance down. The more available balance on the card, the higher your credit score will go.

If you are in need of a car you can go seek out a used car loan. This method will boost your credit more substantially in shorter time than the prepaid or secured card alone if you are diligent in making payments. Many used car dealers have relationships with lenders that will give credit to those with bankruptcy on their record. The interest rates will be substantially higher than those with good credit, but with your extra money after getting out of debt you may be able to pay off sooner. Just be on the lookout for loans that charge penalties for early pay off.

So please do not be afraid that your credit will be ruined for a long ten years. Many are successful in getting their credit scores up into the 700s in a few short years if they work at it. If you reside in the Dayton, OH area and believe you are ready to take the next step contact us at Chris Wesner Law Office LLC, the Dayton Bankruptcy Lawyer.

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