Bankruptcy is a nuclear option though it’s sometimes a necessity.
You’ll find your credit score bottomed out upon completion of your bankruptcy. It will likely cause a shock but do know this is temporary.
Yes, a bankruptcy will linger on your account for a decade. And yes, it will make certain goals like getting loans a hassle.
Follow this guide and you’ll get a credit score back to normal in no time. This guide shares the major steps for effective credit repair after bankruptcy.
Find out Where You Stand
The deed was done… you’ve completed bankruptcy.
You have a while before the bankruptcy drops off (from the date of discharge):
- Chapter 13 — 7 years
- Cheaper 7 — 10 years
Take a Moment to Breath
Take this time to be wary of predatory services.
You’ll have many people coming at you pitching financial services. Learn the signs of scams and avoid them to the best of your ability!
Get Your Credit Score
Use one of the many free credit scoring apps or tools to get your report. You’ll want to confirm balances are reporting at $0. If not, start a dispute.
Figure out when the penalty clock started, too. Your report should reflect this or else refer to your bankruptcy paperwork.
Make a Plan
It’ll take time before everything reflects on your credit. You’ll also want to wait a few months before diving right back into applying for cards, loans, and such.
Make a plan answering:
- Your best options to build credit, fast
- If anyone can aid in rebuilding or act as a safety net
- What may fall off the report that wasn’t wiped by the bankruptcy
Moving forward is as much as being prepared mentally as it is financially.
Reassess Your Lifestyle and Financial Habits
What good is a new financial start if you return to a routine that may have put you there? You’ll need to adjust your lifestyle and spending habits. This is the case even if the bankruptcy resulted from medical bills, job loss, and others.
You may need to introduce the following to keep costs in control:
- A roommate to share and reduce living costs
- Downsizing your home or number of vehicles
- Cutting back on going out and doing more at home
You may need to rethink your social group, too, as they can cause financial envy. This influence can have you spending money you don’t have. Or, doing actions that place you in dire situations that cause financial ruin.
Habits? They’ll need to change, too.
You’ll want to double-down on:
- Creating and sticking to a budget
- Tracking every penny in and out
- Prioritizing savings and financial goals
- Using windfalls to get ahead vs splurging
Take a financial course if these are foreign concepts. Do what it takes to avoid falling into bad routines that could put you back into financial troubles.
Do More with Your Job or Career
You won’t see this topic on these guides for post-bankruptcy but you should! Hopefully, you’re still working a decent job or exploring your career. Hopefully, this work brings in enough money to sustain and put funds to savings.
Here’s why this topic is worth mentioning:
- Increase your income by asking for a raise
- Take on new, side income to give financial flexibility
Your quest in repairing credit after bankruptcy is far easier when you have more money. Ask for a raise is one of the fastest ways to increase this capital.
What can you do to improve your chances of a raise?
- Align your goals with the business and put in the time
- Look up what people in your position earn
- Approach and pitch the idea, backing it with your accomplishments
There’s more to getting a raise than these items but you get the idea. If they say no? Consider another employer. Or, double-down on your budget.
You should also take this time to explore getting extra income:
- Being a rideshare driver or doing delivery/drop-offs
- Doing freelance work online or with local providers
- Renting out an extra room in your home (if you have one)
- Doing yard work, babysitting, caregiving, or household work
Keep paying any and all nonbankruptcy accounts. And, try getting ahead on these with the extra side income. This gives a little psychological boost.
You should also use the extra money to begin building an emergency fund.
Use a Financial Tool to Build Credit
You’ll want to have first accomplished a few items prior to this part:
- Got into a habit of paying all bills on time
- Created a budget and showed you could stick to it
- Built a small emergency fund and cleared lingering debts
Got this far? Good!
The biggest action is now rebuilding credit using a financial tool — like:
- Secured loan
- Secured credit card
- Co-signed or authorized loan/card
Let’s look at the two best options…
A secured card is a slow but steady process most post-bankruptcy individuals take. This involves getting a card after paying a deposit (usually the amount of the credit line, like $200).
You then use the card responsibly:
- Use it for one regular, recurring bill
- Pay the bill off in full each month, on time
- Repeat for the next 6 – 12 months
- Follow up and ask for a credit line increase
Apply for one card at a time to avoid extra inquiries on your credit report. Keep up good financial routines and remove friction for the client. And, ultimately means they see results far sooner than doing so on their own.
Get Help with Credit Repair after Bankruptcy
We get it, you want fast credit repair after bankruptcy. The sooner you can get back on track with your life the better. Our system was built for this purpose, letting people see results in as little as 15 days.
We’d love to help you fix your credit.
See why many choose Pinnacle Credit Management to realign their finances and goals. Learn how our system works and contact us today.