Now that the worst is over, this is the time for you to overhaul your credit rating by developing good habits. Here’s what you are mostly likely to expect as you exit bankruptcy.
- Dangerous Credit Card Offers: Right after a bankruptcy filing, your credit will likely be weak. You’ll probably want to begin rebuilding credit after bankruptcy immediately, but be careful. Some lenders will offer you credit cards that come with high fees, high interest rates and low limits. Without much effort, you can end up back in debt – which will hurt your credit score further.
- Higher Interest Rates: When you do find a line of credit that comes with reasonable terms, you can expect to pay higher interest rates than you would if you had a stronger credit history. But that’s normal. Taking out a small amount of credit at a high interest rate will allow you to begin to establish yourself as a good credit risk by making regular, timely monthly payments.
Don’t despair! Your period of paltry credit offerings shouldn’t last very long, assuming you dedicate yourself to making payments as they come due.
The Years After Bankruptcy
Most people will not qualify for mortgages or car loans directly after filing bankruptcy – and that’s probably a good thing. Establishing credit after bankruptcy is a careful process.
When you’re adjusting to a new, debt-conscious lifestyle, you probably don’t want to worry about major expenses of that sort. But, within two to three years of your filing (and sometimes even sooner), significant loans for a home or car may be within your reach!
- Be patient: Don’t accept the first credit offer you receive. Wait until you qualify for lower interest rates and fees or a higher line of credit. This is the best practice when you are rebuilding credit after bankruptcy.
- Shop around: You’ll probably receive pre-approved credit cards in the mail, but don’t limit yourself to these. Look online and ask around for cards that might better suit your needs – there are lenders willing to extend you credit, but it may take some work to find them after a bankruptcy.
- Stick with it: Over time, the positive action on your credit report will accumulate. Remember, every bill you pay on time helps improve your credit!
The Good News
One final word of encouragement: although bankruptcy can hurt your credit in the months immediately following your filing, its effect won’t typically last a full ten years.
Lenders place more value on recent credit activity than credit action in the past, which means as you prove yourself a responsible credit user after bankruptcy, and your credit should rise!
Return to the top of Your Credit Score After Bankruptcy.