Michael J. Logan, Ltd.

3 steps to rebuilding your credit after bankruptcy

You know bankruptcy is the right thing to do in your situation, but perhaps you still fear the long-term effects it will have. Will it ruin your credit forever? How long will it take to regain financial stability?

The good news is you have more control over your credit than you think. The consequences of filing for bankruptcy are temporary, and this route prevents you from experiencing the worse effects. Taking these three steps to rebuild your credit will get you back on track even sooner and keep you there.

Step 1: Assess your situation

You first need to know how much damage you have done to your credit. This greatly depends on the chapter of bankruptcy you filed and how much non-dischargeable debt you still owe, among other details. You can request your score and report for free from credit bureaus. Review the information with your attorney for errors, and dispute any you find.

Step 2: Create a maintainable budget

Chapter 13 involves a repayment plan that requires you to maintain a budget, but the elimination of most debts in Chapter 7 may make it tempting to continue your current lifestyle. You need to show financial responsibility to win back creditors. Do not get yourself into any further debt. Pay off bills in full and on time. Learn to distinguish between needs and wants, and grow your savings account. Speak to a credit counselor or financial advisor if you need help with establishing a realistic budget.

Step 3: Find the right credit product

Avoid getting any credit cards or loans too soon, as there are many shady companies that like to take advantage of those in your situation. Once you have built up enough of a financial reserve, apply for a secured credit card or loan for a safe way to raise your credit score. Start small and avoid risky products simply because they are available to you. Patience is key in establishing a solid credit rating again.

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