Many people think that when they file bankruptcy there is simply no hope in building their credit back up. This is far from the truth. Sure, bankruptcy will be listed on your credit report for 10 years, but within a matter of a few years, you can build up your credit even if you filed bankruptcy.
By managing your credit responsibly and taking the right steps towards building your credit, you are opening yourself up to the opportunity of being able to build your credit score in just a matter of a few years.
Bankruptcy actually affects the four Cs of credit. Here they are in case you don’t know them.
Collateral: This is simply an asset that can be used for security on a loan that you get. In most cases, there aren’t any assets after bankruptcy is filed. You can take out a loan to buy something to use as collateral or open up a savings account at a bank in order to use it for collateral.
Capacity: When you file bankruptcy, the amount of money that you owe to other people or companies is reduced quite a bit. Capacity is simply something that tells lenders that you have enough income to make the payments on a credit card or loan.
Character: The reputation of your credit is something that many lenders will look at when they are thinking about loaning you money. When you file bankruptcy, they will be much more cautious about loaning you anything. If you manage your finances in a responsible manner, you have the opportunity to rebuild your credit reputation after filing bankruptcy.
Capital: Capital will simply tell others how wealthy you are. Anyone that you want to get a loan from wants to know that you will be able to pay back what they loaned you. When you file bankruptcy, your capital will be determined depending on what type of bankruptcy you filed as well as what assets were lost due to the bankruptcy.
You can rebuild your credit after filing bankruptcy. Here are a few tips to remember:
- Keep in mind that you need to stay with options that are affordable for you.
- Obtain a secured credit card or vehicle loan.
- Make sure that you keep an existing credit card by reaffirming that particular debt.
- If you can’t pay back a loan, DON’T TAKE IT!
- Create a budget that will help you build your credit and help you pay back your current debts.
FAQ: How do I check my Free Credit Report?
Your credit report is the basis for your financial standing. No matter how slick or smart you may be, no bank will touch anyone with a low credit score. It's their money, why would they want to take a bigger risk than they need to?
If you don't know where your credit report score is at, now's the time to take a peek. Don't get surprised with a low credit score when you go in to review your report with a potential lender or even an employer, find out for yourself within minutes.
