Under Life After Bankruptcy
After bankruptcy it can be overwhelming trying to think of what to do next. With your credit, with your life, with making any tiny changes to your life things are suddenly much harder. During the process you were probably told many times this is your fresh start- and it’s true! At least, it’s true as long as you have a plan on how to make it so. If you don’t take control and jump right into building your new, positive, credit history then your “fresh start” can easily start to feel like the old one. So, let’s explore how you can take control.
The first thing you absolutely want to do is get a copy of your credit report. Look it over carefully and make sure that everything included in bankruptcy is marked as such and not open or overdue. If it’s not how it should be then you are going to need to contact the companies and keep talking to people there until this is taken care of. A lot of people have unnecessary shame with their past financial troubles and this stops them from taking care of this important step- don’t let that stop you! The next thing you want to do after bankruptcy is shop around for a secured credit card. These are very similar to the unsecured cards of your past, but with a much lower limit. When you apply you deposit a few hundred dollars into a savings account which the bank will use as collateral and in the event that you fail to make payments the bank will collect their money from the account. When you look for a card make sure to ask that the company reports to the three major credit bureaus; Equifax, Experian, and TransUnion, or all your efforts are doing you no good. The card also needs to have the option to switch to an unsecured card after 12-18 months of on time payments, and there should be no application fee. The annual fee should be reasonable. I recommend searching around to compare rates. Once you have your new card, use it lightly, not passing 30% of your credit limit, and pay the balance in full each month. Once you have this going for you, you should look into obtaining some kind of loan- assuming you don’t already have some that weren’t discharged. You can find a car loan, student loan, or other form of small financing. Paying this off will help you build your credit history.
The goal in doing all of this work is to rebuild. Credit improvement is all about repairing and rebuilding—you’ve already cleared off your old debts which would be the repairing part, now it’s time to work on rebuilding. You want to have a good history with both types of payments (revolving and installment, which are cards and loans) and always make sure you have a good budget so that you don’t get in over your head. As long as you plan things out carefully and make steps you know you can handle, you’ll be well on your way to a much brighter future.
Hopefully you can make all this happen in a two year plan and have a real good credit score to your name by that point. Life hasn’t stopped, and neither will your finances. Be bold and take control of your finances right after bankruptcy.
By Jennifer
Under Credit After Bankruptcy+ Life After Bankruptcy
Despite what you may have been told, credit after bankruptcy doesn’t have to take ten years. You can start building your credit right away and be in good standing in as little as two years.
The first thing you need to do is fix the problems that got you into troubled waters in the first place. If one problem was overspending then it’s time to build a realistic budget and spend within what you make monthly. If you had lost your job and not been able to pay for things, then let’s work on building up an emergency fund. The last thing you want to do is take the time to build up a strong financial history only to end up in another financial crisis and having to declare bankruptcy again a few years down the line. The next thing to do is check your credit report for mistakes. Your score is based on information in the report. You want to make sure that everything included in the bankruptcy is marked as such. If not, you need to call the company and keep calling until this is changed. Accounts marked as open or overdue will hurt all of your positive efforts so it’s important this is taken care of. Once these problem areas are taken care of you’ll want to focus on building up a positive history. There are two ways you want to do this: installment payments and revolving payments. Installment payments would be some kind of loan, like for college, a car, or a mortgage. Revolving payments are credit cards or home equity lines of credit. If you didn’t discharge a mortgage loan, then you are set! Just remember to make timely payments. Otherwise, consider an auto loan or other financing options. For revolving payments, if you aren’t interested in securing home equity lines of credit, then I suggest looking at secured credit cards. These work just like other cards, with monthly payments, but you put a few hundred dollars into an account for the length of the card, typically 12-18 months, and that money secures your card. You can usually find these at your bank.
There are some important things to keep in mind when searching. Only use 30% of your credit limit and always pay the card off in full every month. Call the company before you apply and make sure they report to the three major bureaus, Experian, Equifax, and TransUnion. If they don’t the card does you no good.Make sure the card will become unsecured after 12-18 months of timely payments.You should NOT have to pay an application fee and the annual fee should seem reasonable. You may want to compare fees at several banks.
With all of this going for you, after two years you should be in good standing. Even though past problems won’t fall off your report for a good deal longer you can still have good credit after bankruptcy.
By Jennifer
Under Credit After Bankruptcy+ Life After Bankruptcy
What do you do now that it’s all over? There’s an anticlimactic feeling to being done discharging your debts. It’s supposed to be all over, you’re supposed to be free, but how to live after bankruptcy? What do you do now to move on and get your life going again? There are a number of things you can do to move forward.
The first thing to start working on is letting go of your feelings about everything and coming to terms with all that has happened. Often, there was some big event (like a divorce, medical issue, natural disaster, etc) that happened before you wound up in your bad financial situation and then had to go through the process of discharging your debts. This hasn’t given you much time to deal with your emotions. If you are feeling guilty, ashamed, or embarrassed it can keep you feeling scared to make any financial moves. If you’re too scared to do anything financial you’ll never rebuild your credit and be free of all of this.
The next thing to do is start setting up an emergency fund. Set up an initial one of about fifteen hundred dollars so that if anything comes up (flat tire, broken water heater, emergency vet bill) you don’t need to do something like charge up a credit card or get a loan—otherwise known as go into debt. Whenever you have to borrow from this fund, replenish it.
Whenever you have to apply for anything there is one good rule that’s good enough to repeat: shop around, shop around, shop around. Always shop around and read through the terms and conditions anything so that you thoroughly understand anything you are signing up for. A lot of companies that are willing to work with people who have risky credit histories hide large fees in the terms and conditions. This goes for pretty much anything from loans, cards, insurance, and rentals (cars or apartments).
Always have money ready to go for deposits. There is usually a large deposit or collateral associated with any new accounts you open in your life after bankruptcy.
Use some of that deposit money to get secured cards and loans to rebuild your credit. You should work on building up your credit as soon as possible. In the first two years it is important to build a plan and do what you can so that in the years following things will be easier for you. In just a few years you can have an acceptable rating and be able to do things more easily—it doesn’t have to be until your bankruptcy falls off that things get easier for you.
Check your credit report often. This is something everyone should do really, but it’s more important when you have a bad rating and are working on improving your situation. A month or so after things are settled make sure that things were actually marked as included in bankruptcy and not late—and if they’re not marked correctly call companies and keep on them until they do it.
Just because things have changed doesn’t mean you can hide. Adjust, figure out how to live after bankruptcy, and get on with your life.
By Jennifer
Under Credit After Bankruptcy+ Life After Bankruptcy
Credit cards after bankruptcy will be different than before, but that doesn’t mean you shouldn’t use them.
You won’t be able to find an unsecured card right away, but that’s ok. With a focused plan you can set the goal to be in good financial standing in two years, and this is an important part of a plan. The thing you have to do in these two years is show that you can be trusted to make payments and not get into debt problems again. Your history makes you a risk for companies, so you need to build two news years of positive history. Because you are obviously not the only person in this situation, there are products made specifically with this in mind. Banks and other financial institutions have secured cards. You deposit some money, typically a few hundred dollars, into a savings account which secures things for the bank. You use it just as you would an unsecured one, but with a much lower limit. This makes you less of a risk for the company.
When you go to look at credit cards after bankruptcy there are a few things to keep in mind. First of all, you want to make sure there are no application fees and the annual fees seem reasonable so do compare between companies. You need to ask to make sure that the company does report to the three major credit bureaus; Experian, Equifax, and TransUnion. If they don’t do this you are wasting your efforts, so go elsewhere. The last item of importance is to make sure that after 12-18 months of timely payments you have the option to switch to an unsecured deal. On your end, you need to make sure you use it lightly, and pay your balance monthly. This can be a hard pattern to get into if you’ve never done it before, but it will do good things for your credit.
Things are undeniably different for you now, but you don’t need to hide away from your finances. Take control and have a plan for credit cards after bankruptcy.
By Jennifer
Under Life After Bankruptcy+ Loans After Bankruptcy
Your experiences with loans after bankruptcy will be very different than they were before. Until you’ve established some credit history things will be difficult for you, but there are several ways to go about moving forward. Some of them will cost more money than others, some of them are faster than others, so you’ll really have to look over what you circumstances are before making a decision. If you’re looking to rebuild your credit history having a positive payment history here can be a great way to work towards improving your score, so keep that in mind while moving forward.
CD secured loans after bankruptcy are a great way to make things happen quickly and smoothly for you, assuming you have some money saved you won’t be needing for a while. CDs are certificates of deposit, you deposit a certain amount of money (typically $1,000 and up) into an account, agreeing not to take it out for a specified amount of time (about a year or more) and you’ll earn a higher interest rate on this money than you would in a normal savings account in return. Right when you start this account you can ask about taking out a loan using the CD as collateral. The downside to this is that you’ll only have a short amount of time to repay the balance, but you’ll have a lower interest rate than you will with more traditional methods, and have a much easier time getting approval. These types of offers are largely set up for this purpose so your lender will be familiar with the plan.
Secured loans after bankruptcy are really the easiest way to go. You’ll get offered more reasonable interest rates and have a much easier time finding approval. This is because whatever you offer up for collateral your lender will repossess if you fail to repay them, so they know they will be able to get their money back somehow. You can use a variety of items of things for collateral, but keep in mind that every lender will have different criteria for what they’ll accept. Real estate is the only thing that a bank will likely accept, the other most common thing of value is your vehicle. If neither of these things work for you, there is the option of high priced collectibles like jewelry. With these items it’ll be a bit harder to find a lender but when you do they will take possession of the item and hold it until you have finished repaying the balance.
Unsecured loans after bankruptcy are going to be a bit more difficult for you to find, and when you do, your interest rates will be very, very high. A lot of people decide to do this because either they need funding urgently (this is a bad situation to be in, but you probably know that) or because they don’t have another financing option and want to build up their credit history. In either situation this is an opportunity to build a new history and it’s important to take advantage of it. Accept now that you will be paying a lot in interest (and really if you’re just going to be building credit it might be better to take your time and save some money for the CD option mentioned above unless you’re in a hurry) and find the best deal you can. Make sure to read over the terms and conditions because lenders know that you don’t have a lot of options with your history and will try to take advantage of you by offering what seems like a low interest rate, and hiding a lot of fees to make up for it in the terms and conditions. Make sure you’ve read these over and you’re aware of everything you’re going to be paying so you can plan for it. No matter what you do, make sure that you do not accept an offer without first building a budget. The quickest way to end up in financial ruin is to go without a budget. If you aren’t very sure that you’ll be able to afford the monthly payments, do not move forward, no matter what.
Figuring out what option will work best for you is really based on your own individual needs and what you’re able to do. Getting loans after bankruptcy is a very complicated decision that needs to be well thought out and working into your long term financial plans, but when you’ve gone over your budget and made things work it can be a great way to rebuild your credit history and move forward with your life.
By Jennifer
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