The Bankruptcy Abuse Prevention and Consumer Protection Act requires consumers to complete an approved credit counseling session prior to filing for bankruptcy. After filing, debtors must complete an approved financial education course before they can discharge their debts. These requirements were included to ensure consumers make an informed choice about bankruptcy, its alternatives and consequences. Perhaps more importantly, they were designed to provide bankruptcy filers with the financial skills necessary to build a strong financial foundation and avoid future financial problems.
Filing for bankruptcy protection can impact your credit report and score for up to 10 years. The good news is that no matter how bad things look, you can always bounce back and re-establish a good credit score. Following are some ways to re-build credit after bankruptcy.
Pay yourself first. Unfortunately, bad things sometimes happen to good people. Expect the unexpected and put money away for the rainy days. Having an emergency fund can keep a minor financial setback from turning into a major financial crisis.
Clean up your credit report. It’s important to take the necessary steps to dispute any incorrect information on your credit report. Visit AnnualCreditReport.com for one free annual credit report from each of the three major bureaus.
Get a secured line of credit. Obtaining new credit (with reasonable repayment terms) after a bankruptcy can be difficult. Consider a secured account or a small personal loan with a bank or credit union if traditional lines prove to be too costly.
Use credit wisely. Credit cards are useful, but should only be used as a tool of convenience and not as an extension of your income. Always have a plan for payoff when making purchases with credit cards; ideally less than 90 days.
Pay bills on time. Create a calendar with due dates and payment amounts. Set up automatic payments with your bank to ensure timely delivery. Also, don’t neglect creditors such as the phone and utility companies. Many people don’t realize these are creditors too.
When trying to reestablish credit, it pays to be persistent and patient. The good news is that scores are continually updated and may move several points each month.