Rebuilding Your Credit After Bankruptcy

The most common concern that folks have after filing for bankruptcy is how to rebuild their credit. The first step is to consider how you ended up in a situation where you needed to file for bankruptcy in the first place. Get real with yourself. Were there unforeseen circumstances or an underlying issue that needs to be addressed, such as, compulsive spending?

If it is the latter situation, I cannot stress how important it is to address the problem before rebuilding your credit. Like all addictions, it is easier to get handle on complusive spending when you have the assistance of a support group like Debtors Anonymous or the assistance of a counselor.

Steps to Rebuild Your Credit

• Create a budget.
  • Get out a piece of paper or open up your Wordprocessor and write down where your money is going. Include everything.
  • Start to prioritize your expenses. Figure out what you need, can do without, or can purchase for less money.
• Don't charge items you cannot afford or do not need.
  • Only buy items you can pay off when the bill becomes due.
  • Don't buy on impulse.  Take a day or two to think about whether you actually need the item.
  • Don't use your credit card to buy items you could pay with your debit card or cash.
• Pay close attention to the interest rate of your credit card. Some companies target people with bad credit and hit them hard with high interest rates. It is not uncommon for people to find themselves right back where they started: in significant amounts of debt that they cannot afford to pay off.
• Don't use a pre-paid credit card. Since these companies do not report to credit bureaus, they will not help you rebuild your credit.
• Pay your bills on time and in full.
• Keep your eye on your credit report. Remember you are entitled to a free credit report every year from each of the major credit bureaus.